McDonald's Q2 Earnings Beat Puts U.S. Traffic and Margins in Focus

MCD Earnings Beat Relies on Franchised Strength

Adjusted earnings were $3.38 per share, up 6% year over year and 1.8% above the Zacks Consensus Estimate of $3.32. Revenues rose 4% to $7.10 billion but missed the consensus mark of $7.14 billion by 0.5%.

Franchised restaurant margins increased 4.3% to $3.71 billion and represented roughly 90% of total restaurant margin dollars. Company-operated restaurant margins rose 1.8% overall, but U.S. margins fell 6% to $91 million, reflecting continued inflationary cost pressure.

McDonald’s U.S. Traffic Remains the Main Pressure Point

U.S. comparable sales increased 0.8%, supported by positive average check growth and favorable product mix, but lower guest counts limited the result. Management estimated that value execution issues accounted for about two-thirds of the customer traffic shortfall versus expectations.

The weakness carried into the third quarter, with U.S. comparable sales slightly negative in July. Chipotle Mexican Grill, Inc. CMG reported second-quarter comparable restaurant sales growth of 2.2%, including a 1.0% increase in transactions. Restaurant Brands International Inc. QSR posted 8.5% comparable sales growth at Burger King U.S., adding competitive context to McDonald’s traffic challenge.

MCD International Sales Provide a Growth Cushion

International Operated Markets comparable sales rose 1.5%, led by Germany, Australia and the United Kingdom. International Developmental Licensed Markets increased 1.9%, with Japan leading growth while China remained a drag.

Management expects comparable sales growth in both international segments to accelerate sequentially in the third quarter and on a two-year stacked basis. That outlook gives MCD a potential offset while U.S. traffic initiatives take time to gain traction.

McDonald’s Expansion Plan Keeps 2026 Growth Intact

McDonald’s still expects to open about 2,600 restaurants in 2026, producing roughly 2,100 net additions. Net restaurant expansion is projected to contribute about 2.5% to systemwide sales growth in constant currencies, even as the 50,000-restaurant target moves to 2028.

The company continues to expect a full-year operating margin in the mid-to-high 40% range. Capital expenditures are projected at $3.7-$3.9 billion, while interest expense is expected to increase 4-6%. The outlook therefore pairs continued restaurant investment with higher financing expense.

MCD Signals Reflect a Mixed Post-Earnings Setup

The quarter leaves investors with a clear trade-off. Franchised economics and international growth remain supportive, but U.S. traffic, company-operated margins and execution are still key variables to watch.

MCD currently carries a Zacks Rank #3 (Hold), a neutral short-term signal. The VGM Score of D and Value Score of D are less supportive, while the Growth Score of C is middling. The Momentum Score of B is the strongest Style Score signal, but the overall mix does not point to a uniformly favorable setup. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research