McDonald’s Corporation (ticker: MCD) shares are trading higher after the company delivered a strong first-quarter earnings report suggesting CEO Steve Easterbrook’s turnaround initiatives seem to be working. In the first quarter, McDonald’s reported better-than-expected earnings and same-restaurant sales, as well as successful launches of key products.
McDonald’s revenue declined 3.9 percent from a year ago to $5.68 billion in the quarter. Year-over-year revenue growth has been down for seven consecutive quarters now, but the first-quarter decline was likely influenced by sales of restaurants to franchisees, which is a major part of Easterbrook’s long-term strategy. Despite the decline, revenue still topped analyst estimates of $5.53 billion.
Net income of $1.21 billion was up 8 percent compared to a year ago, buoyed by aggressive cost cutting. Same-restaurant sales climbed 1.7 percent, well above consensus analyst estimates of 1.3 percent.
“Our efforts to build a better McDonald’s are yielding meaningful results with continued positive momentum and a strong start to 2017 that includes positive comparable sales across all segments, higher global guest counts and enhanced profitability,” Easterbrook says.
Easterbrook took over the struggling fast food giant in 2015. One of the biggest changes to the menu under his leadership has been the aggressive expansion of the company’s all-day breakfast menu, a move that has been a huge success.
[See: 8 Stocks to Profit From America’s Love of Burgers.]
Several key product launches and menu promotions gained meaningful market traction in the quarter, including the Mac Jr. and coffee priced at $1.
Stephens analyst Will Slabaugh says McDonald’s is now threatening to re-claim market share it lost to rival Restaurant Brands International ( QSR) in recent years. Restarant Brands owns popular fast food chains Tim Hortons and Burger King.
“We are pleased with these results and would highlight the U.S. [same-store sales] acceleration as promising as we look to easing compares,” Slabaugh says. “We attribute the top-line success to high-impact, traffic-driving product news and expect MCD to continue focusing on the value guest to recapture lost traffic to QSR peers.”
[Read: Stock Market Showdown: McDonald’s vs. Burger King.]
Stephens maintains an “overweight” rating on McDonalds and a $140 price target for the stock.
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McDonald’s Corporation (MCD) Turnaround Gaining Momentum originally appeared on usnews.com
