McDonald's Has to Do Better
While McDonald's (NYSE: MCD) recent earnings miss isn't the end of the world, the larger trends within the company suggest the bullish run the company has experienced has limits. Yes, the stock has outpaced the market for most of 2019, but earnings and revenue growth remain rather unimpressive for this restaurant chain stalwart.
One big critique of McDonald's over the past few years has been the revenue impact of its refranchising efforts. McDonald's has worked to unlock earnings value by franchising corporate stores in an effort to cut down on its own operational costs. The effort has certainly worked, but it also limits long-term growth, as the addition of a franchisee reduces revenue intake at the same time it is cutting costs.
In the third quarter, McDonald's bucked the trend of stagnant revenue a bit but disappointed on the earnings side. Analysts had anticipated earnings per share (EPS) of $2.20, but McDonald's underwhelmed with a $2.11 EPS. The earnings mark was a minute increase from Q3 2018's $2.10 per share. McDonald's net income actually declined 2% to $1.61 billion, and the earnings uptick mostly stemmed from a 2% decrease in the number of shares outstanding.
Source Fool.com
