McDonald's on Monday missed earnings estimates for the second quarter but said its new $5 value meals are luring lower-income diners amid high food costs. McDonald's stock jumped above a key level.
McDonald's Earnings, Sales Decline
Early Monday, the Dow Jones burger giant reported earnings of $2.97 per share on revenue of $6.49 billion, an overall miss. Year over year, McDonald's earnings fell 6% as sales dropped 0.1%, according to FactSet. That marked the first earnings decline since Q3 2022 and the first sales drop since Q4 2022.
Same-store sales fell 1% during the second quarter, the first decline since Q4 2020 and missing views for a 0.4% gain.
$5 Meal Deal Gains Traction For McDonald's Stock
However, management said the new "$5 Meal Deal" fueled guest counts in a challenging environment. "We've seen a lot of enthusiasm, and the number of $5 meal deals sold are above expectations," Joe Erlinger, president of McDonald's USA, said on an earnings call on Monday.
Notably, Erlinger added: "Trial rates of the deal are highest among lower-income consumers, and sentiment toward the brand around value and affordability has begun to shift positively." Lower-income consumers are among those hardest hit as grocery costs and restaurant menu prices continue high.
McDonald's Stock Clears Key Levels
Shares of the Dow Jones fast-food giant popped 3.8% to 261.48 in big volume on the stock market today.
Shares cleared their 50-day moving average, breaking a trendline and marking a two-month high.
However, MCD stock remains below the 200-day line, down nearly 12% so far this year.
Restaurant Stocks On Deck
McDonald's launched the $5 value meal on June 25, just days before the second quarter ended.
The company said on Monday that 93% of its U.S. restaurants will now extend the $5 meal offer, which was meant to run for a limited time, into the summer. McDonald's says it has been known for value for more than 70 years.
Starbucks, Wendy's, Yum Brands' Taco Bell and Restaurant Brands' Burger King also debuted meal deals in recent weeks. Each hopes to stimulate consumer demand amid rising food prices.
Wendy's is set to announce its results on Wednesday and Starbucks on Tuesday. Restaurant Brands and Yum Brands are expected to report their quarterly earnings next week.
All four restaurant stocks rose on Monday amid the McDonald's value meal optimism.
