10-QPeriod: Q3 FY2019

MCDONALDS CORP Quarterly Report for Q3 Ended Sep 30, 2019

Filed November 4, 2019For Securities:MCD

Summary

McDonald's Corporation reported its third-quarter and nine-month results for 2019, demonstrating resilience and continued strategic execution. Total revenues saw a slight increase of 1% ($5,430.6 million) for the quarter and a 1% decrease ($15,727.5 million) for the nine months, with constant currency figures showing stronger growth of 3% in both periods. This performance was largely driven by robust comparable sales growth across all segments, with the U.S. up 4.8% and International Developmental Licensed Markets leading at 8.1% for the quarter. The company continues to prioritize its 'Velocity Growth Plan,' focusing on enhancing customer experience through 'Experience of the Future' (EOTF) modernizations, digital initiatives including AI-driven personalization, and expanding delivery services. These strategic investments are aimed at driving sustainable comparable sales and guest count growth, ultimately benefiting shareholder value. While net income saw a slight dip of 2% to $1,607.9 million for the quarter, diluted earnings per share remained stable at $2.11, reflecting the positive impact of share repurchases and effective management of costs.

Financial Highlights

50 data points
Beta

Revenue

$5.50B

89.8% Gross Margin

Net Income

$1.61B

29.2% Net Margin

EPS (Diluted)

$2.11

Total Assets

$45.80B

Cash & Equivalents

$1.18B

Free Cash Flow

$1.74B

Financial Statements
Beta
Revenue$5.50B
Cost of Revenue$559.50M
Gross Profit$4.94B
SG&A Expenses$543.60M
Operating Expenses$3.09B
Operating Income$2.41B
Interest Expense$280.60M
Net Income$1.61B
EPS (Basic)$2.13
EPS (Diluted)$2.11
Shares Outstanding (Basic)756.60M
Shares Outstanding (Diluted)763.90M

Key Highlights

  • 1Global comparable sales increased by 5.9% for both the third quarter and the first nine months of 2019.
  • 2The company repurchased $1.5 billion of stock in the quarter, contributing to a total of $3.6 billion in share repurchases for the nine months.
  • 3Consolidated revenues saw a 1% increase to $5,430.6 million for the quarter, driven by strong franchised restaurant revenues.
  • 4Operating income remained stable year-over-year for the quarter at $2,409.3 million, with a 2% increase in constant currency.
  • 5Diluted earnings per share (EPS) for the quarter were $2.11, flat compared to the prior year, but increased by 2% in constant currency.
  • 6The company continued to invest in its 'Velocity Growth Plan,' with over 9,000 U.S. restaurants now modernized through the 'Experience of the Future' initiative.
  • 7Dividends declared per common share increased by 11% to $2.41 for the quarter compared to the prior year's $2.17, with a declared fourth-quarter dividend of $1.25 per share.

Frequently Asked Questions

For the third quarter of 2019, McDonald's reported total revenues of $5,430.6 million, a 1% increase compared to the prior year. Net income was $1,607.9 million, a 2% decrease, and diluted earnings per share were $2.11, flat year-over-year. The company experienced strong comparable sales growth across all segments, indicating healthy underlying business performance.

McDonald's is actively investing in its 'Velocity Growth Plan,' which includes modernizing restaurants through the 'Experience of the Future' (EOTF) initiative, enhancing digital capabilities with AI and personalization technologies, and expanding its delivery services. The company noted that over 9,000 U.S. restaurants are now EOTF-converted, representing about two-thirds of its U.S. locations.

Foreign currency fluctuations had a negative impact on McDonald's reported results. For the third quarter, the negative impact of foreign currency translation on diluted EPS was $0.03. For the nine months, the impact was $0.19. Management analyzes results in 'constant currency' to better reflect underlying business trends, and these constant currency figures showed stronger growth than reported numbers.

McDonald's returned $2.4 billion to shareholders in the third quarter through share repurchases ($1.5 billion) and dividends ($0.87 billion). This brings the cumulative return to shareholders to $22.5 billion against a three-year target of $25 billion. The company also announced an 8% increase in its quarterly dividend to $1.25 per share.