MCD Earnings Preview: Looking to break two straight quarters of negative comps

McDonald's (MCD) is set to report its Q4 earnings on Monday before the market opens, with the earnings call scheduled for 8:30 AM ET. Analysts expect the company to post an adjusted EPS of $2.85, reflecting a 3% year-over-year decline, while revenue is anticipated to rise 1% to $6.45 billion. One of the biggest concerns for investors is the ongoing fallout from the E. coli outbreak announced in Q4, which may have had lingering effects on consumer perception. Although the Quarter Pounder beef patties were not implicated, with slivered onions suspected as the source, analysts will likely press management on its impact.

McDonald’s same-store sales (comps) will be another focal point, especially after two consecutive quarters of negative global comps. In Q3, the company reported a -1.5% decline, following a -1.0% drop in Q2. This marks a sharp downturn from the +1.9% growth in Q1 and +3.4% in Q4 2023. The primary challenge has been international markets, with International Operated Markets (IOM) comps falling -2.1%, particularly due to weakness in France and the UK, while International Developmental Licensed (IDL) comps declined -3.5%, driven by negative trends in China and the Middle East. U.S. comps were slightly positive at +0.3% in Q3, rebounding from the -0.7% drop in Q2, thanks to the popularity of the $5 value meal and the Collector’s Edition campaign.

Heading into the earnings report, there is uncertainty surrounding the E. coli outbreak’s impact, but the broader trend suggests that McDonald’s could see better performance in 2025. Citi analysts believe Q4 could mark a low point for comps, as the company launched its national McValue menu on January 7, 2025, and introduced new menu items such as Snack Wraps and chicken tenders. Citi expects these efforts, combined with better visibility on U.S. and global comps, to set MCD up for relative outperformance. Despite recent headwinds, they upgraded the stock to a Buy with a price target of $334, seeing an opportunity in the stock’s pullback.

However, not all analysts share the same optimism. KeyB lowered its price target to $320 from $330, citing McDonald's underperformance relative to the S&P 500 by 14% since late October. The firm believes the shift in investor sentiment away from highly-franchised global fast-food names towards full-service domestic restaurants has contributed to the stock’s weakness. KeyBank also reduced its same-store sales forecast for Q4 to -1% and Q1 2025 to +1.5%, factoring in lingering E. coli concerns and severe weather disruptions. Despite these revisions, the firm remains confident in McDonald’s ability to drive long-term market share gains through innovation and marketing efforts.

Looking ahead, McDonald's faces a critical test in regaining consumer trust and driving traffic back to its stores. While January started off slow due to poor weather conditions, the McValue platform and promotional campaigns are expected to boost sales throughout the year. Analysts will be closely watching the company’s forward guidance, particularly around margins and franchisee profitability. If McDonald's can successfully navigate these challenges, it could see a return to positive comps and margin expansion, positioning itself for stronger growth in the second half of 2025. Investors and analysts alike will be tuned in on Monday to assess whether the worst is behind the company or if more headwinds lie ahead.