McDonald's Q2 2024 earnings preview: value meals in focus

​​​McDonald's is set to report its second quarter (Q2) earnings for 2024 before markets open on Monday. The fast-food giant's results come amid reports of plans to extend its recently launched $5 value meal promotion into August, signalling a potential shift in strategy to combat inflationary pressures on consumer spending.

​McDonald’s earnings – what to expect

​Analysts expect McDonald's revenue to rise slightly to $6.63 billion from $6.5 billion in Q2 of 2024. However, net income is projected to fall to $2.24 billion from $2.31 billion last year.

​UBS analysts, while maintaining a "buy" rating, have lowered their price target for McDonald's to $305 from $335. They suggest that Q2 earnings could be pressured by inflation but anticipate improved performance in the second half of the year as the chain's emphasis on value attracts customers back to stores.

​Key performance metrics

​Comparable store sales have been a crucial metric for McDonald's, showing signs of slowdown in recent quarters from the double-digit increases seen last year. In Q2 of 2023, McDonald's reported 11.7% comparable sales growth globally and just over 10% in the US Executives have noted the impact of inflation on many customers, leading to a strategic shift towards value offerings.

​Value meal strategy to pay dividends

​After acknowledging the impact of inflation on sales in the first half of 2024, McDonald's, along with several other restaurant chains, has rolled out lower-cost value meals. The strategy aims to win back price-conscious customers who have pulled back on discretionary spending.

​Early indications of the $5 value meal promotion, launched in late June, appear positive. Reports from Bloomberg and CNBC suggest that nearly all McDonald's locations have agreed to extend the promotion beyond its initial four-week schedule, potentially into August.

​Analyst perspectives

​Baird analysts express growing confidence in McDonald's emphasis on value in its newest advertising efforts. They believe this approach could improve the chain's perception among consumers and drive traffic back to McDonald's locations.

​"History would suggest McDonald's can gain significant share when emphasising value-oriented price points with its sizable advertising budget," the Baird analysts noted.

​What should investors watch for?

​As McDonald's prepares to report its earnings, investors will likely be looking for confirmation on the future of the value meal promotion. The company's leadership is reportedly enthusiastic about the rate at which customers are returning to McDonald's locations due to this initiative.

​Additionally, investors will be keen to understand how the value strategy impacts overall sales and profitability, and whether it can effectively counter the inflationary pressures that have been challenging the fast-food industry.

​McDonald’s stock price – what do the brokers say?

​McDonald’s currently has a ranking of 6 on the SmartScore available on the IG platform, rating it as ‘neutral’:

​Of the 27 analysts with ratings on the McDonald’s price, 19 have a ‘buy’ recommendation, with 8 ‘holds’ and no ‘sells’.

​McDonald’s stock price – technical analysis

​The long-term rally in McDonald’s stock price has recently come unstuck. After hitting fresh highs at the beginning of the year, the stock has since declined sharply, and in early July reached its lowest level since October 2022. It then recovered above the 50-day simple moving average (SMA) but has since struggled.

​Since the declines began back in late February, the stock has recorded a series of lower highs and lower lows. A first step to changing this would be a push above $264; if this can hold then a trend change could be at hand.

​A failure to sustain any post-earnings gains could see recent lows tested once again.

​McDonald's price chart