McDonald’s Looks to Deals, Expanded Menu to Boost Growth. Earnings Will Show the Momentum.

To attract customers, McDonald’s has been rolling out new products such as McCrispy Strips and Snack Wraps. (Mario Tama/Getty Images)

Investors are closely watching whether McDonald’s new menu items and promotional deals could put it back on the growth track. The fast-food giant is set to report earnings on Wednesday before the market opens.

For the three months ended in June, analysts polled by FactSet expect McDonald’s to post $3.14 in earnings per share, up 5.7% from the year-ago period. Net revenue is expected to increase 3.2% to $6.7 billion, and same-store sales are expected to grow 2.6% from a year ago.

Three months ago, the fast-food restaurant giant posted first-quarter revenue that was 3% lower than a year ago and missed analysts’ expectations.

While comparable sales among international franchisees increased 3.5% thanks to strength in the Middle East and Japan, the U.S. comparable sales declined 3.6% from the year-ago period, dragging the global comparable sales to a 1% decline.

McDonald’s, along with many fast-food chains, had hiked prices aggressively during the postpandemic inflation. This has driven away budget-constrained consumers who are dialing back from eating out in a bid to save money, and cook more at home.

Visits to McDonald’s fell 2.6% during the first quarter, compared with a drop of 1.4% for the entire retail and dining sector, according to Placer.ai, a data company that tracks visits to retailers and restaurants.

Still, Wall Street believes shares could bounce back as things improve in the second half of the year. The three dozen analysts tracked by FactSet have an average price target of $328 for McDonald’s stock, suggesting a 5% upside from the current level.

To lure customers back, McDonald’s has been rolling out new products such as McCrispy Strips and Snack Wraps, and launched value deals like the $5 Meal Deal, and Buy One Get One for $1.

The company plans to expand the operating hours at the majority of its U.S. restaurants to late night and continue opening new units around the globe at a 4% to 5% annual pace. All these should help drive sales.

Earlier efforts appeared to be working, as same-store sales growth turned positive in the fourth quarter of 2024 after falling year-over-year for two straight quarters. But weak first-quarter results have made investors worry that the momentum might have faded again.

Investors will be watching for a second-quarter rebound. Latest Placer.ai data suggest that McDonald’s outperformed the wider fast-food sector in the second quarter, with total visits up 0.8% year-over-year and visits per location remaining flat. That isn’t strong growth, but it shows signs of a turnaround.

The improvement might be attributed to the chain’s “well-received menu innovation” and “ongoing expansion,” according to Placer.ai. Southwestern states saw the strongest growth in same-store visits, suggesting the region may be particularly ripe for new sites, said the firm.

In the third quarter, McDonald’s plans to test a range of coffees, refreshers and “dirty sodas” with add-ins like dried fruit and flavored syrups starting in September. The push for premium drinks aims to better engage with Gen Z consumers and generate high-margin sales.

McDonald’s shares are up 2.1% year to date as of Tuesday’s close.

Write to Evie Liu at evie.liu@barrons.com