Insights

Can McDonald’s Sustain Record Profitability Amid Rising Costs?

McDonald’s (NYSE: MCD) is scheduled to report first-quarter 2022 earnings before the markets open on Thursday, April 28. The restaurant brand has done an excellent job rebounding from pandemic-induced closures in 2020 that hurt sales.
McDonald’s has meaningfully increased its digital presence, and the move is paying off. Consumers appreciate the added convenience and are demonstrating it with increased spending. As a result, the company reported record profits in fiscal 2021. That said, investors will be watching McDonald’s Q1 earnings on Thursday to see if it can sustain the momentum. 

Image source: Getty Images.

Digital sales are boosting McDonald’s in several ways
In its fiscal year 2021, which ended on Dec. 31, McDonald’s boosted revenue by 21% to $23.2 billion. To put that growth into context, consider that the company had not grown revenue by more than 2.1% in any single year in the previous decade. In fact, its compounded annual revenue growth in the last 10 years is negative 1.5%, including the 21% increase in 2021. The historical figures highlight just how impressive 2021 was for McDonald’s.
Of course, it helped that economies were reopening throughout the year and consumers were eager to leave their homes and visit restaurants in person. That said, McDonald’s performance in 2021 was fueled by continued growth in digital sales. The category made up 25% of total systemwide sales in its top six markets in the most recently completed year. Another way to look at it is consumers made $18 billion in McDonald’s orders digitally — a massive sum, to be sure. 
Note digital sales include those made through its mobile app, third-party delivery providers, and kiosks inside its restaurants. These all have in common that they don’t require a cashier to take and input an order and then process payment. That feature has been a boon for McDonald’s and its franchisees in the aftermath of the COVID-19 outbreak, when they struggled to attract and retain employees. From a consumer perspective, it reduces friction in the ordering process, adds convenience, and creates new opportunities to enjoy McDonald’s that otherwise wouldn’t exist. For instance, an individual who only picked up its food on the way home from work during the week can now order for delivery on weekends. 

MCD EPS Diluted (TTM) data by YCharts
It’s all coming together nicely for the company, which reported earnings per share of $10.04 in 2021, a 59.1% improvement from 2020 and the most in its history.
What this could mean for McDonald’s investors
Analysts on Wall Street expect the company to report revenue of $5.59 billion and earnings per share of $2.17. If it meets those projections, it will represent increases of 11% and 13.02%, respectively, from the same period the year before.

MCD data by YCharts
Fortunately for potential investors, the market is arguably late in recognizing McDonald’s impressive operating performance. The stock is down 7% year to date, allowing long-term investors to capitalize on the step-change improvement in McDonald’s that the digital boost provides. Barring a disaster in its Q1 earnings or guidance for the rest of the year, investors can feel good about adding McDonald’s stock to their portfolios. 
Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

McDonald’s (NYSE: MCD) is scheduled to report first-quarter 2022 earnings before the markets open on Thursday, April 28. The restaurant brand has done an excellent job rebounding from pandemic-induced closures in 2020 that hurt sales.

McDonald’s has meaningfully increased its digital presence, and the move is paying off. Consumers appreciate the added convenience and are demonstrating it with increased spending. As a result, the company reported record profits in fiscal 2021. That said, investors will be watching McDonald’s Q1 earnings on Thursday to see if it can sustain the momentum. 

Image source: Getty Images.

Digital sales are boosting McDonald’s in several ways

In its fiscal year 2021, which ended on Dec. 31, McDonald’s boosted revenue by 21% to $23.2 billion. To put that growth into context, consider that the company had not grown revenue by more than 2.1% in any single year in the previous decade. In fact, its compounded annual revenue growth in the last 10 years is negative 1.5%, including the 21% increase in 2021. The historical figures highlight just how impressive 2021 was for McDonald’s.

Of course, it helped that economies were reopening throughout the year and consumers were eager to leave their homes and visit restaurants in person. That said, McDonald’s performance in 2021 was fueled by continued growth in digital sales. The category made up 25% of total systemwide sales in its top six markets in the most recently completed year. Another way to look at it is consumers made $18 billion in McDonald’s orders digitally — a massive sum, to be sure. 

Note digital sales include those made through its mobile app, third-party delivery providers, and kiosks inside its restaurants. These all have in common that they don’t require a cashier to take and input an order and then process payment. That feature has been a boon for McDonald’s and its franchisees in the aftermath of the COVID-19 outbreak, when they struggled to attract and retain employees. From a consumer perspective, it reduces friction in the ordering process, adds convenience, and creates new opportunities to enjoy McDonald’s that otherwise wouldn’t exist. For instance, an individual who only picked up its food on the way home from work during the week can now order for delivery on weekends. 

MCD EPS Diluted (TTM) data by YCharts

It’s all coming together nicely for the company, which reported earnings per share of $10.04 in 2021, a 59.1% improvement from 2020 and the most in its history.

What this could mean for McDonald’s investors

Analysts on Wall Street expect the company to report revenue of $5.59 billion and earnings per share of $2.17. If it meets those projections, it will represent increases of 11% and 13.02%, respectively, from the same period the year before.

MCD data by YCharts

Fortunately for potential investors, the market is arguably late in recognizing McDonald’s impressive operating performance. The stock is down 7% year to date, allowing long-term investors to capitalize on the step-change improvement in McDonald’s that the digital boost provides. Barring a disaster in its Q1 earnings or guidance for the rest of the year, investors can feel good about adding McDonald’s stock to their portfolios

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US & HK* Trades. Click Here!