McDonald’s Corp. shares edged higher on Wednesday even after the fast-food giant missed Wall Street’s earnings and revenue forecasts for the third quarter.
Investors appeared encouraged by stronger-than-expected comparable sales growth and the company’s focus on value-driven strategies aimed at reviving traffic amid consumer belt-tightening.
McDonald’s shares surged 3.34% to $309 on Wednesday’s trading.
Earnings miss but comparable sales impress
The Chicago-based burger chain reported adjusted earnings of $3.22 per share, below the $3.33 expected by analysts polled by FactSet.
Revenue came in at $7.08 billion, roughly in line with projections of $7.10 billion and up 3% year over year. Net income rose 1% to $2.28 billion.
Despite missing profit expectations, investors reacted positively as McDonald’s posted gains in same-store sales.
Comparable sales rose 2.4% in the US and 3.6% globally, outpacing analysts’ forecasts.
The company credited higher average checks and strong international performance for the improvement.
Revenue from franchised restaurants climbed to $4.36 billion, compared with $4.09 billion a year earlier, while sales at company-owned stores fell 3% to $2.56 billion.
Inflation continued to pressure profit margins, particularly in McDonald’s domestic operations.
Chief Executive Officer Chris Kempczinski said the company’s ability to deliver “everyday value and affordability” is fueling momentum despite a challenging environment.
“We’re fueling momentum by delivering everyday value and affordability,” he said in the company’s statement.
Value deals and menu innovation help offset pressure
McDonald’s has been working to regain price-sensitive customers who scaled back on dining out amid persistent inflation.
The company has introduced new products such as McCrispy Strips and Snack Wraps, and rolled out $5 Meal Deals and “Buy One Get One for $1” promotions.
In September, McDonald’s cut prices on eight popular US combo meals by about 15% compared to individual item pricing.
The chain also revived its Extra Value Meals advertising campaign and introduced summer promotions to appeal to budget-conscious diners.
In addition to its focus on affordability, McDonald’s has expanded its late-night hours and broadened its beverage lineup to attract younger customers, particularly Gen Z.
The new offerings include coffee drinks, refreshers, and “dirty sodas”- soft drinks mixed with flavored syrups and fruit add-ins.
These efforts helped McDonald’s sustain growth in comparable sales even as overall fast-food traffic has fallen 2.3% this year, compared with a 1.6% decline for the broader restaurant industry, according to data from Black Box Intelligence.
Industry faces mixed fortunes
The broader fast-food industry has shown mixed performance this earnings season.
Restaurant Brands International, parent of Burger King, Popeyes, and Tim Hortons, reported a 6.9% increase in systemwide sales and a 4% rise in comparable sales for the third quarter.
By contrast, Chipotle Mexican Grill shares tumbled nearly 20% last week after the company cut its full-year same-store sales forecast, citing weaker spending from lower-income and younger consumers.
Wendy’s is set to report results later this week, with analysts expecting sales to drop 5.6% year over year.
Despite inflation pressures and heightened competition, McDonald’s maintained its fiscal-year outlook for operating margins, capital expenditures, and unit growth.
The company’s shares were up more than 3% in trading, extending a modest 6% gain year to date.
As consumer habits continue to shift and value becomes increasingly important, McDonald’s appears to be banking on affordability and innovation to maintain its global momentum.
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