McDonald’s Corporation MCD reported impressive second-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share of $1.99 surpassed the consensus mark of $1.92 by 3.6% and increased 15% from the year-ago quarter (12% in constant currencies). The upside reflects stronger operating performance.

Meanwhile, foreign currency translation had a positive impact of 5 cents per share on earnings in the quarter. Following the quarterly results, not much movement was witnessed in the company’s share price during the pre-market trading session. However, the stock has declined 10.6% in the past six months compared with industry’s 6% decrease.

Revenues Decline but Global Comps Improve

Revenues of $5,353.9 million outpaced the consensus mark of $5,315 million by 0.7% but declined 12% year over year. The downturn reflects the impact of the company’s strategic refranchising initiatives. On a constant-currency basis, the metric declined 14% on a year-over-year basis.

At company-operated restaurants, revenues decreased 27% year over year to $2,594.9 million. However, the same at franchise-operated restaurants improved 11% to $2,759 million.

Global comps grew 4% driven by positive comparable sales across all segments. Notably, this marked the twelfth consecutive quarter of positive comparable sales. In the first quarter of 2018, comps increased 5.5%.

McDonald’s Corporation Price, Consensus and EPS Surprise

Solid Comps Across Segments

U.S.: Comps grew 2.6% in the second quarter owing to increase in average check resulting from rise in menu price as well as product mix shift. Comps growth, however, was lower than the prior-quarter rise of 2.9%.

Segment operating income declined 7% due to strategic restructuring charges.

International Lead Markets: Comps at this segment grew 4.9% year over year, lower than a 7.8% rise witnessed in the last reported quarter. Robust sales in the United Kingdom and France along with upbeat results across all other markets drove comps.

Operating income was up 15%, including the impact of foreign currency translation. At constant currency, the figure increased 9% primarily on the back of sales-driven improvements in franchised margin dollars.

High-Growth Markets: Comps at this segment grew 2.4%, lower than the prior-quarter’s increase of 4.7%. The uptick can be attributed to strong performance in Italy as well as positive results across majority of the segments, partially offset by continual challenges in South Korea.

Foundational Markets: Comps at this segment grew 6.8% on the back of positive sales performance across all geographic regions. However, the figure came in below 8.7% growth reported in the last reported quarter.

Zacks Rank & Key Picks

McDonald’s carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Dave & Buster’s Entertainment, Inc. PLAY, BJ’s Restaurants, Inc. BJRI and Chipotle Mexican Grill, Inc. CMG. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dave & Buster’s Entertainment has an impressive long-term earnings growth rate of 14.8%.

BJ’s Restaurants has reported better-than-expected earnings in the trailing two quarters.

Chipotle Mexican Grill has an impressive long-term earnings growth rate of 17%.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it’s predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce “”the world’s first trillionaires,”” but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks’ 3 Best Stocks to Play This Trend >>

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
 
Chipotle Mexican Grill, Inc. (CMG): Free Stock Analysis Report
 
BJ’s Restaurants, Inc. (BJRI): Free Stock Analysis Report
 
McDonald’s Corporation (MCD): Free Stock Analysis Report
 
Dave & Buster’s Entertainment, Inc. (PLAY): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research