McDonald's Q4 earnings: will the fast-food king continue to beat the forecast?

When is the report date?

McDonald's Corporation will report its fourth-quarter earnings on January 27^th, before the market opens. The report will be for the fiscal Quarter ending Dec 2021.

What to expect?

According to Zacks Investment Research, based on 13 analysts' forecasts, the consensus EPS forecast for the quarter is $2.31, up by 37.6% from EPS of $1.70 one year ago. Based on this forecast, McDonald's will record a 16% drop in EPS; however, it is still in line with the fast-food giant's seasonal pattern.

Revenue is forecast to climb 13.5% year-over-year to $6.03 billion, benefitting from higher menu prices, a successful digital loyalty program and the regional boost. In the Q3 earnings, McDonald's international operated markets segment saw its same-store sales rise 13.9% from a year ago, fuelled by recovered demand after Covid restrictions eased in the United Kingdom, Canada, France, and Germany. As a result, there's good reason to believe that countries like Australia and Japan's same-store sales will show some significant rebound in the fourth quarter when these nations conclude their lockdown.

Based on all the earnings reported in 2021, McDonald's rarely let its shareholders down. Earnings from quarters two and three successfully beat the forecast by double digits. Hence, market participants expect McDonald's to continue its outstanding record in the fourth quarter and outperform its pre-Covid level amid the new Omicron variant.

^{Source: https://www.marketbeat.com/instant-alerts/nyse-mcd-earnings-date-2022-01-2-3/}

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Key watch points:

• Pricing power
• Labour shortage
• Impact by Omicron

From a macro point of view, inflation is believed to be a major risk and a vital test for every company's ongoing profitability. From the last quarter's report, we can see that the leading burger and chips makers' menu prices have increased by 6% yearly. Can McDonald's continue to exercise its pricing power when its hometown country's inflation rate grew at the fastest pace in 30 years to offset increased labour and commodity costs?

Staffing shortage is another surging concern that hit the world's best-known fast-food chain. It was reported that some restaurants scaled back their late-night hours and understaffed some locations that has put pressure on the chain's speed of service and sales volume. Therefore, McDonald's outlook for the months ahead will be in focus as the investors are keen to know how the fast-food giant will deal with worries surrounding staffing shortages considering the fast-spreading of Omicron continues to deteriorate the labour crisis.

Technical Analysis

McDonald's continues to reward its investors with a robust return. Since early 2021, the share price of fast-food king has grown by 24.6%. The prospect for its price looks also strong as the market is making the shift to favour value stocks under the tighter monetary environment.

^{Image Source: Zacks Investment Research}

From a technical standpoint, MCD has pulled back 7% from its all-time high of $271.15 recorded in Jan 4th. Despite recent losses, the price remains in the ascending wedge above 100 days moving average, suggesting the long-term uptrend stay unchanged.

For the short-term outlook, the current major level of support comes in at around $253, a break of which sees $249 as a possible turning point for the price to head south. However, an up-turned RSI indicator from the oversold territory and the increased trading volume last week can both be viewed as bull sign.

^{Source: Tradingview}

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