McDonalds 2025 Q1 Earnings Misses Targets as Net Income Declines 3%
Tuesday, May 13, 2025 6:36 am ET
57min read Mcdonald's (MCD), ranking 44th by market capitalization reported its fiscal 2025 Q1 earnings on May 12th, 2025. McDonald's reported a decline in both revenue and net income, missing analyst expectations. The company's net income decreased by 3% from the previous year, reflecting a challenging economic environment. Despite the setback, management maintained its full-year guidance, expecting slight growth in systemwide sales. Analysts predict a revenue of approximately $6.1 billion for Q2 2025 and EPS of $3.12. McDonald's continues to focus on enhancing its value proposition and adapting to market dynamics to navigate the current challenges.
Revenue
McDonald's experienced a 4.7% decrease in total revenue for Q1 2025, amounting to $5.79 billion compared to $6.08 billion in Q1 2024. Revenue from franchised restaurants was $3.66 billion, while sales from company-owned and operated restaurants reached $2.13 billion. Additionally, other revenue streams contributed $162 million, bringing total revenues to $5.96 billion.
Earnings/Net Income
McDonald's EPS fell by 2.2% to $2.61 in Q1 2025, down from $2.67 in Q1 2024. Net income also declined by 3.2%, reaching $1.87 billion. Despite this decrease, McDonald's has consistently maintained profitability over the years. The EPS and net income figures reflect a solid, yet slightly weakened performance.
Post-Earnings Price Action Review
The strategy of buying McDonald's stock when revenue misses and holding for 30 days has shown moderate returns with significant volatility and risk. The 30-day holding period allowed for some recovery, as evidenced by the strategy's 66.32% return and 10.77% CAGR. However, the Sharpe ratio remained low at 0.57, indicating poor risk-adjusted returns. Additionally, the strategy experienced a maximum drawdown of -19.78%, highlighting its high volatility and potential for significant losses. Investors should be cautious of the inherent risks associated with this approach, although it demonstrates potential for recovery over the short term.
CEO Commentary
"McDonald's has a 70-year legacy of innovation, leadership, and proven agility, all of which give us confidence in our ability to navigate even the toughest of market conditions and gain market share," said Chris Kempczinski, Chairman and CEO. He noted that while global comparable sales decreased by 1.0% and were impacted by a tough comparison to Leap Day last year, the company remains committed to providing value through exciting new menu items and beloved favorites. Kempczinski emphasized the importance of adapting to current market challenges, particularly in light of consumer uncertainty, stating that McDonald's is well-positioned to leverage its strong brand to attract customers.
Guidance
Management maintained its full-year outlook for net restaurant growth to contribute slightly over 2% to systemwide sales growth, with operating margins expected to be in the mid- to high-40% range. Analysts expect a revenue of approximately $6.1 billion for Q2 2025, with an estimated earnings per share of $3.12 for the fiscal quarter ending June 30, 2025. Management anticipates a gradual recovery in traffic as they continue to enhance their value positioning and adapt to market dynamics.
Additional News
McDonald's plans to hire 375,000 U.S. workers this summer, marking the company's biggest hiring push in years. This initiative is driven by U.S. expansion, with plans to open 900 more restaurants by 2027. The hiring announcement was made by U.S. Labor Secretary Lori Chavez-DeRemer and McDonald's U.S. President Joe Erlinger. McDonald's emphasized that the new hires will be for permanent positions, indicating optimism for improved U.S. restaurant traffic. The company's last major summer hiring spree was in 2020, when it added 260,000 workers as restaurants reopened post-COVID-19 closures. The current hiring plan reflects confidence in a potential recovery in U.S. restaurant activity.
Revenue
McDonald's experienced a 4.7% decrease in total revenue for Q1 2025, amounting to $5.79 billion compared to $6.08 billion in Q1 2024. Revenue from franchised restaurants was $3.66 billion, while sales from company-owned and operated restaurants reached $2.13 billion. Additionally, other revenue streams contributed $162 million, bringing total revenues to $5.96 billion.
Earnings/Net Income
McDonald's EPS fell by 2.2% to $2.61 in Q1 2025, down from $2.67 in Q1 2024. Net income also declined by 3.2%, reaching $1.87 billion. Despite this decrease, McDonald's has consistently maintained profitability over the years. The EPS and net income figures reflect a solid, yet slightly weakened performance.
Post-Earnings Price Action Review
The strategy of buying McDonald's stock when revenue misses and holding for 30 days has shown moderate returns with significant volatility and risk. The 30-day holding period allowed for some recovery, as evidenced by the strategy's 66.32% return and 10.77% CAGR. However, the Sharpe ratio remained low at 0.57, indicating poor risk-adjusted returns. Additionally, the strategy experienced a maximum drawdown of -19.78%, highlighting its high volatility and potential for significant losses. Investors should be cautious of the inherent risks associated with this approach, although it demonstrates potential for recovery over the short term.
CEO Commentary
"McDonald's has a 70-year legacy of innovation, leadership, and proven agility, all of which give us confidence in our ability to navigate even the toughest of market conditions and gain market share," said Chris Kempczinski, Chairman and CEO. He noted that while global comparable sales decreased by 1.0% and were impacted by a tough comparison to Leap Day last year, the company remains committed to providing value through exciting new menu items and beloved favorites. Kempczinski emphasized the importance of adapting to current market challenges, particularly in light of consumer uncertainty, stating that McDonald's is well-positioned to leverage its strong brand to attract customers.
Guidance
Management maintained its full-year outlook for net restaurant growth to contribute slightly over 2% to systemwide sales growth, with operating margins expected to be in the mid- to high-40% range. Analysts expect a revenue of approximately $6.1 billion for Q2 2025, with an estimated earnings per share of $3.12 for the fiscal quarter ending June 30, 2025. Management anticipates a gradual recovery in traffic as they continue to enhance their value positioning and adapt to market dynamics.
Additional News
McDonald's plans to hire 375,000 U.S. workers this summer, marking the company's biggest hiring push in years. This initiative is driven by U.S. expansion, with plans to open 900 more restaurants by 2027. The hiring announcement was made by U.S. Labor Secretary Lori Chavez-DeRemer and McDonald's U.S. President Joe Erlinger. McDonald's emphasized that the new hires will be for permanent positions, indicating optimism for improved U.S. restaurant traffic. The company's last major summer hiring spree was in 2020, when it added 260,000 workers as restaurants reopened post-COVID-19 closures. The current hiring plan reflects confidence in a potential recovery in U.S. restaurant activity.
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