McDonald's (MCD, Financial) reported Q3 results with slight growth, trading flat after back-to-back EPS misses in Q1 and Q2. The company posted a 2.7% year-over-year revenue increase to $6.87 billion, slightly exceeding expectations, following a revenue decline in the previous quarter.
- McDonald's addressed the E. coli issue, linking cases to slivered onions from a single facility, which has been indefinitely removed from their supply chain. The Colorado Department of Agriculture confirmed no E. coli was found in beef patties, and no further testing is planned. McDonald's is optimistic about reintroducing quarter pounders soon.
- Global comps were negative for the second consecutive quarter, with Q3 at -1.5%, similar to Q2's -1.0%. This is a decline from +1.9% in Q1 and +3.4% in Q4, mainly due to international market struggles. IOM comps decreased by -2.1%, impacted by weak performance in France and the UK, while IDL comps fell by -3.5%, affected by Middle East conflicts and negative comps in China, despite positive Latin American results.
- In the US, comps rose slightly by +0.3%, improving from Q2's -0.7%. The $5 value meal attracted lower-income consumers, and the Collectors Edition campaign boosted US traffic alongside the Chicken Big Mac's success.
McDonald's has shifted focus towards value, extending the $5 meal deal into December and planning more value options in Q1 2025. This strategy includes free Euro Happy Meals in France, three-for-three pounds in the UK, and $1 coffee in Canada.
Investors reacted positively to McDonald's efforts to manage the E. coli situation. The Q3 results showed modest EPS and revenue growth, with US comps returning to positive territory. However, concerns remain about the potential impact on Q4 results, as consumer confidence may take time to rebuild despite the containment of the issue.
