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NYSE: McDonald’s share price and Q1 earnings results preview


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What to expect and how to trade McDonald’s upcoming results

McDonald'sSource: Bloomberg
 
 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 17 April 2023 

When are McDonald’s results expected?

McDonald's Corp (All Sessions) is set to release its first quarter (Q1) 2023 results on 25 April 2023. The results are for the fiscal quarter ending March 2023.

What is ‘The Street’s’ expectation for the Q1 2023 results?

Wall Street’s expectations for the upcoming results are as follows:

Revenue of $5,560 billion : -1.9% year on year (YoY)
Earnings per share (EPS): $2.307 (55.9% YoY)

Bloomberg data on McDonald'sSource: Bloomberg

According to Bloomberg news “McDonald’s 1Q US same-store sales may have risen in the mid-single digits, boosted by price increases and robust marketing and value offerings, as well as digital and delivery expansion.”

Earlier this year several analysts upwardly revised their estimates for McDonald’s amid an announcement by its CEO, Chris Kempczinski, in which he said that the burger giant will lay off a portion of its 200,00 world-wide corporate employees.

McDonald’s has started implementing its cost-cutting in early April in order to become more efficient and innovative with it recently unveiling its first automated location which many see as a step for the company to replace customer-facing staff with machines.

According to Fox News Digital the company “will also accelerate the pace of its restaurant openings, and said it may test more new concepts aimed at convenience for customers like the Order Ahead Lane” offered at a recently-opened restaurant in Forth Worth, Texas, USA.

The fast-food chain has also been “focusing on upgrading its core items to boost sales” and “is rolling out a series of changes designed to improve its signature burgers” said CNN News on Monday 17 April.

Bloomberg analyst dataSource: Bloomberg

Bloomberg data shows a consensus analyst rating of ‘buy’ for McDonald’s with 30 analysts rating the company as a buy, 11 as a hold and one as a sell with the median of estimates suggesting a long-term price target of $297.35 for the share, nearly 3% higher than the current price (as of 17 April 2023).

How to trade McDonald’s into the results

IG sentiment data shows that only 23% of clients with open positions on the share (as of 17 April 2023) expect the price to rise over the near term, while 77% of clients expect the price to fall.

74% of clients who trade the share sold it this month but 100% of clients bought it this week.

IG sentiment dataSource: IG

McDonald’s share price – technical view

The McDonald’s share price is not only trading in new record all-time highs, so far at $289.94, but has risen for five consecutive weeks, rising by over 9% year-to-date, whilst targeting the psychological $300 mark.

McDonald’s Weekly Chart

McDonald's Weekly ChartSource: Tradingview

When looking at the flagpole on the weekly chart - the distance from the September low to the early November high – and projecting it higher from the breakout point of the bull flag at $271.20 in late March, a medium-term upside target can be calculated. It comes in at $322.29 for the share and could be reached before year end.

Good support can be seen between the November and December highs at $281.67 to $279.90. While this support area underpins, the medium-term uptrend is deemed to be intact since it also includes the last reaction low, made on 6 April, and the March-to-April uptrend line on the daily chart.

Given the highly overbought Relative Strength Index (RSI) which trades at level s last seen in November on the daily chart, it wouldn’t come as a surprise if the McDonald’s share price were to lose some upside momentum ahead of its Q1 earnings on 25 April 2023.

McDonald’s Daily Chart

McDonald's Daily ChartSource: Tradingview

Any short-term retracement lower ahead of the company’s earnings may provide good entry points for a stock that looks to be heading towards the $300 mark.

Summary

McDonald’s is set to release Q1 2023 earnings on 25 April 2023.

Q1 2023 results are expected to show a YoY fall in revenue by around -1.9% to $5,560 billion but a nearly 56% YoY rise in EPS to $2.307.

Revenue is expected to be boosted by cost-cutting, price increases and robust marketing and value offerings, as well as digital and delivery expansion.

Long-term broker consensus suggests the share to currently be a ‘buy’, with a median price target of $297.35.

Only 23% of IG’s clients with open positions are long the share with 74% of clients who trade the share selling it this month but 100% of clients buying it this week.

The McDonald’s share price is not only trading in new record all-time highs, so far at $289.94, but has risen for five consecutive weeks, rising by over 9% year-to-date, whilst targeting the psychological $300 mark.

Given the technically overbought share price, upside momentum may soon diminish but while the November and December highs at $281.67 to $279.90 underpin, the medium-term uptrend remains intact.

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