McDonald's Earnings Preview For Q3: Is The Chinese Meat Scare A Factor?

McDonald's Corporation MCD will report its third quarter earnings on Tuesday before the opening bell. The Big Mac maker is expected to earn $1.38 per share on $7.2 billion of review according to analysts' consensus expectations.

McDonald's last reported its quarterly results on July 22. At the time, the company earned $1.40 per share, falling short of the consensus estimate by $0.04. Revenue of $7.18 billion fell short of analyst expectations by $100 million.

Global comparable sales in the quarter were relatively flat, falling short of expectations of a 0.8 percent gain. Same-store U.S. sales fell more than the 0.3 percent decline expected at 1.5 percent. European same-store sales fell one percent despite analysts expecting a 0.7 percent growth, while Asia/Pacific same-store sales rose only 1.1 percent, below analysts expectations of 1.5 percent growth.

Following a disappointing second quarter performance, several analysts downgraded the stock.

Data coming from NPD Group may not instill confidence with investors. The advisory group issued a long-term forecast for restaurant traffic to grow at less than 1 percent annually.

Developments In Asia To Weigh On Earnings

Due to a meat scare crisis in China, the company was forced to only sell drinks, french fries and desserts for a limited time in the country. The company did restore its full menu in early August, but the damage may have already been done as the company disclosed that food safety issues in China affected markets representing 10 percent of its revenue.

Related Link: Morgan Stanley Prefers Investing In Whoppers Over Big Macs

McDonald's Japan withdrew its earnings guidance on July 29 and said it was working on a contingency plan after the meat scandal in China. On October 7, McDonald's Japan warned investors it expects its first yearly lose in 11 years with a projected $157 million loss.

McDonald's issued a third quarter warning during its August sales report. The company disclosed that its third quarter results will be impacted negatively by $0.15 to $0.20 due to weak Chinese sales in the face of the food safety issue. McDonald's will issue full-year projection during its third quarter report.

Analyst Expectations

Below or some analyst expectations for McDonald's quarter.

Analysts at Bernstein expect McDonald's to report an earnings per share of $1.40 on revenue of $7.207 billion.

Analysts at JPMorgan expect McDonald's to report an earnings per share of $1.33 on revenue of $7.135 billion.

Analysts at Deutsche Bank expect McDonald's to report an earnings per share of $1.42 on revenue of $7.133 billion.