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MCD Preview: Comps Could Be Key

By Ron Thomas

 About this article:
 McDonald's is expected to report EPS of 97 cents, up 17% from 83 cents last year, on sales growth of 4.8%, to $6.18 billion. Outstanding shares are expected to decline 6%. While the comps are likely to be about 7% for the quarter (5% for the U.S., 8% for Europe and 6% for the rest of world), which overcomes cost pressures, investors are looking down the road to an economic slowdown in the U.S., Europe and possibly in the developing world as well. Using the 5% risk premium for a strong consumer cyclical (well under the rest for the restaurant chains), at $57, the stock discounts a 3% five-year EPS growth rate. For comparison, a sort of Street consensus growth algorithm for McDonald's, which I would agree with for normal times, is 2% unit growth, 1 to 3% comps for 3 to 5% sales and revenue...

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