McDonald's Corporation MCD is slated to release third-quarter 2026 results on Nov. 4, before the opening bell.
In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 1.8%. MCD’s earnings surpassed estimates in three of the trailing four quarters and missed once. The average beat over this period is 0.9%, as shown in the chart below.
Image Source: Zacks Investment Research
Trend in Estimate Revision
The Zacks Consensus Estimate for third-quarter earnings per share (EPS) has decreased to $3.36 from $3.37 in the past 30 days. The estimated figure indicates a 4.4% increase from the year-ago EPS of $3.22. The consensus mark for revenues is pegged at $7.28 billion, indicating 2.9% year-over-year growth.
What the Zacks Model Unveils
Our proven model doesn’t predict an earnings beat for McDonald's this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.
Earnings ESP: McDonald's has an Earnings ESP of -0.10%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Influencing Q3 Performance
McDonald's beverage platform expansion, featuring crafted sodas, refreshers, cold coffee and energy drinks, might have supported sales growth in third-quarter 2026. Strong initial performance in the United States, Canada and Germany, along with higher food attachment and increased afternoon traffic, may have boosted revenue. The continued popularity of $5 Meal Deals and Extra Value Meals, supported by renewed digital promotions, might also have encouraged customer visits.
International markets are likely to have provided additional sales support. Management expected comparable sales growth in International Operated Markets and International Developmental Licensed Markets to have accelerated sequentially in the third quarter. Menu innovation, value offerings and loyalty programs in markets such as Germany, Australia, the United Kingdom and Japan might have aided performance. Restaurant expansion might have also contributed incremental sales.
McDonald's U.S. business continued to face pressure from subdued consumer spending and weak restaurant traffic. Management said U.S. comparable sales were slightly negative in July. Inconsistent execution of the EDAP menu, lower-than-expected customer awareness and the withdrawal of certain digital promotions might have continued to weigh on customer visits.
Operational challenges and marketing inefficiencies might have further constrained sales. Multiple product launches and promotional campaigns overwhelmed restaurant teams, leading to longer service times and lower customer satisfaction. The FIFA campaign also generated a lower-than-expected sales uplift, potentially limiting top-line growth.
McDonald's franchise-based business model and continued contributions from international markets might have supported profitability. The beverage platform's incremental sales and improved food attachment are expected to have boosted restaurant-level performance. Efforts to simplify restaurant operations, reduce non-customer-facing activities and streamline global systems might have improved efficiency and helped control costs. Foreign currency translation is expected to have provided some earnings support.
Persistent inflationary pressures on food, paper and labor costs might have weighed on McDonald's operating margins. Increased spending on value offerings, digital promotions and marketing initiatives aimed at reviving customer traffic might have further pressured profitability.
Additionally, operational inefficiencies, longer service times and weaker customer traffic are likely to have reduced restaurant productivity and operating leverage. The need to maintain competitive pricing amid elevated input costs might have further constrained margin growth.
Price Performance & Valuation
In the past year, the company has declined 12.9% compared with the Restaurant industry’s decrease of 0.5%. The stock has also underperformed the S&P 500’s rally of 10%. Other industry players like Darden Restaurants, Inc. DRI, Starbucks Corporation SBUX and Yum China Holdings, Inc. YUMC have gained 24%, 28% and 4.1%, respectively.
Price Performance
Image Source: Zacks Investment Research
Let us assess the value MCD offers to investors at its current levels.
From a valuation point of view, the stock is trading at a discount. MCD’s forward 12-month price-to-earnings ratio stands at 19.07, lower than the industry’s ratio of 21.56.
P/E (F12M)
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Investment Thoughts
McDonald's continues to face challenges from sluggish U.S. customer traffic, inconsistent execution of value offerings and operational inefficiencies, which could limit its sales recovery and weigh on profitability. Elevated food, paper and labor costs, coupled with increased promotional spending, might further pressure margins.
The negative Earnings ESP and Zacks Rank #4 also fail to provide confidence in an earnings beat ahead of the third-quarter results. Although MCD's valuation appears attractive relative to the industry, its ongoing operational and fundamental challenges, along with subdued earnings expectations, suggest limited near-term upside potential. Therefore, investors may be better off avoiding fresh positions in the stock ahead of the earnings announcement and waiting for clearer signs of improving traffic, execution and profitability.
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McDonald's Corporation (MCD): Free Stock Analysis Report
Starbucks Corporation (SBUX): Free Stock Analysis Report
Darden Restaurants, Inc. (DRI): Free Stock Analysis Report
Yum China (YUMC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).