McDonald’s Stock Rises After Earnings Beat. What It Says About New Menu Items and Price Hikes.

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

McDonald’ s stock rose after it posted quarterly results that topped Wall Street’s expectations early Wednesday. Investors were closely watching whether McDonald’s new menu items and promotional deals could be put back on the growth track.

Second-quarter adjusted earnings per share (EPS) came in at $3.19 on revenue of $6.8 billion, beating analysts’ expectations of adjusted EPS of $3.14 on revenue of $6.7 billion, according to FactSet. Earnings increased 12% from a year ago, while revenue grew by 5%.

That’s a sharp improvement from the first quarter, when the fast-food restaurant giant posted revenue that was 3% lower than the year-ago period and missed analysts’ expectations.

McDonald’s strong revenue comes on the back of a 3.8% growth in global comparable sales, which was driven by not only strength in its international stores, but also a 2.5% growth in the U.S. In the first quarter, U.S. comparable sales fell 3.6% from the year-ago period.

“Our […] sales growth this quarter is a testament to the power of compelling value, standout marketing, and menu innovation—proving again that when we stay focused on executing what matters most to our customers, we grow,” said CEO Chris Kempczinski in a statement.

The company’s continuous technology investments, as well as ability to scale digital solutions at speed, will also “continue to elevate the McDonald’s experience for customers and crew,” he said.

The stock was up 2.9% to $307.45 in Wednesday trading. Prior to the earnings report, McDonald’s shares were up 2.1% year to date as of Tuesday’s close.

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 late night operating hours at the majority of its U.S. restaurants 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 had made investors worry that the momentum might have faded again.

The second-quarter rebound has given investors more confidence that McDonald’s menu innovation and meal deals are driving consumers back.

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 is part of the company’s goal to better engage with Gen Z consumers and generate high-margin sales.

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