What to expect from McDonald’s quarterly report

On Thursday, McDonald's is expected to release its earnings report for the third quarter of 2022 before the opening of trading.

Bloomberg consensus forecast:

    Expected revenue: $5.70 billion

    Expected earnings per share (EPS): $2.57

During the quarter ended September 30, 2022, analysts have been closely monitoring the effect of inflation, exchange rates, and any success McDonald's had in regard to its limited-time offerings.

Despite the fact that Goldman Sachs recommends McDonald's shares for buying, they recently lowered its target price to $270 from $278. According to the statement of analyst Jared Garber made in his recent note, the company is taking into account "updated estimates that have been lowered due to a weaker economic background in Europe and inflation."

According to the note, the overall percentage of McDonald's units outside the United States, i.e. international presence, was 66% in fiscal year 2021, second only to Yum! Brands, 67%, and Domino's Pizza, 70%. For McDonald's in particular, Goldman analysts are closely monitoring Japan, where the average FX/USD rate decreased by 20% year-over-year in the third quarter compared to Europe and the UK, where the decline was 14%.

As noted in Cowen, McDonald's has "the highest exposure in Europe and is most affected by movements in the euro, British pound sterling and Australian dollar." The rating of McDonald's shares is defined by Cowen as “outperform”, and the target price is indicated at $280.

Peter Saleh analyst at BTIG, whose company has a Buy rating on McDonald's stock and a target price of $280, recently spoke with franchise owners and the company expects strong growth in US sales, saying he is "confident US sales remain strong despite excessive inflation."

Costs will also be in the spotlight. Saleh added that some prices are stabilizing, and franchise owners shared "some cautiously positive reviews about goods and labor, indicating that beef and pork prices have stabilized, and no longer show the monthly growth that was at the beginning of this year."

As for the labor market, he noted that "the environment seems to be gradually improving."