McDonald's (NYSE: MCD), whose competitors include Yum! Brands (NYSE: YUM), Burger King (NYSE: BKC), and Wendy's (NYSE: WEN), isn't known for being a part of a healthy diet, no matter how much branding it's done in that area. However, it is known for delivering good earnings. That's why investors probably aren't too worried when it comes to Wednesday, the day that the fast-food behemoth is set to hand off a sack of quarterly numbers at the earnings-report drive-thru.
According to AOL Finance, McDonald's beat the street by a wide margin in the first quarter. The call was for about 70 cents per share which Mickey Dee's beat by a whopping 11 cents. The previous quarters weren't as impressive, but they were solid enough. McDonald's seems to have the game of at least matching expectations down pat, so I am confident that come Wednesday, the company's bottom line will be close to the 86 cents per share that Wall Street is looking for in the second quarter, according to Earnings.com.
If McDonald's makes the number, then it will represent growth of over 20%. Double-digit appreciation is a valuable commodity in this time period. I can't say, though, that McDonald's won't have its challenges cut out for it. After all, inflation is affecting everyone, and fuel prices theoretically could hamper the popularity of the company's valuable drive-thru asset (I used one last evening myself). But McDonald's has that famous dollar menu going for it, so even in tough times, fans of fatty foodstuffs can still afford the oily, heart-clogging grub.
Of course, the company could still report decent numbers and see a sell-off in its shares. I took a look at Yum! Brands' most recent report and found that Wall Street was none too happy about the margins. So, even though Yum! beat expectations and otherwise had a decent report, Wall Street focused on other issues. Don't get me wrong, margins are important, and investors will be watching them when McDonald's reports. But if McDonald's sees a sell-off on outlook or margins or whatever, but beats earnings and has good comps, it might be a buying opportunity for long-term investors (after they perform their own due diligence, of course). The stock isn't too far away from a 52-week high as I write this, and it has been strong over most timeframes recorded at the AOL Finance snapshot page. And the dividend yield isn't bad right now, either.
In conclusion, I'm looking for McDonald's to report double-digit bottom-line growth and to meet earnings expectations for the most part (hey, maybe the beat-by-the-proverbial penny might happen). If the company misses, I would be surprised. Margins will be something to check out, and investors will need to see what management says as far as the rough economic times are concerned. I'm not looking to trade McDonald's ahead of the earnings.
Disclosure: I don't own any company mentioned; positions can change at any time.
Comfort Zone Investing: Survival of the fittest -- letting some banks fail
Three All-American stocks for portfolio fireworks
Michael Jackson fireworks, the workaholic
