McDonald’s beats earnings as customers splurge on deals

While McDonald’s may be in the eye of a storm, recent developments reveal not all is bleak.

The company reported robust quarterly earnings on Tuesday that exceeded Wall Street’s expectations, revealing its wallet-friendly options have resonated with U.S. customers, even as it navigates a rollercoaster of challenges. Shares of McDonald’s were down in early morning trading.

“We will stay laser-focused on providing an unparalleled experience with simple, everyday value and affordability that our consumers can count on as they continue to be mindful about their spending,” said Chairman and CEO Chris Kempczinski. This focus comes as the company reports a slight rise in U.S. sales, with a 0.3% increase compared to the previous quarter.

Notably, McDonald’s did not mention the E. coli outbreak in its earnings report. During the third quarter, the chain generated revenue of $6.87 billion, translating to about $3.23 earnings per share—both surpassing analyst forecasts of $6.82 billion and $3.20, respectively.

Recent months have witnessed a whirlwind of events, including: The E. coli outbreak, a staged shift by former president Donald Trump, the introduction of a Chicken Big Mac, an extension of a $5 meal deal, and the sale of Collector’s Cups at inflated prices on third party sites. Compounding these issues, McDonald’s launched a lawsuit against the “Big Four” beef companies, including Tyson Foods (TSN+0.89%) and Cargill.

Currently, the iconic burger chain is dealing with an E. coli issue, with investigations pinpointing onions as the source, not the beef.

Michael Halen, a senior restaurant and food analyst, told Quartz guest counts and same-store sales could take a meaningful hit in the fourth quarter, with pressure likely extending into the first half of 2025, following the E. coli scare. Same-stores dropped about 9% after the outbreak announcement, according to Bloomberg data. Halen argues that the impact will be “shorter and shallower” than the crisis Chipotle (CMG+2.02%) faced between 2015 and 2017, when same-store sales plummeted by 20.4%. The main difference stems from McDonald’s operational structure, which doesn’t expose food to multiple employees and customers in the same way Chipotle’s make-line does.

Brian Mulberry, a Zacks Investment Management client portfolio manager, echoed similar sentiments, asserting that because McDonald’s has “identified and isolated” the specific cause, it will not pose a long-term problem. The chain has already said it would bring the big burger back – minus the onions.

Wall Street is cautious, however. Financial firm Baird downgraded its stock rating post-outbreak, predicting sales to fall in the coming quarter. Now, the chain must navigate the risks associated with a negative media blitz and evolving consumer sentiment. With rising prices deterring customers and competitors like Wendy’s (WEN+4.48%) and Taco Bell (YUM+1.40%) gaining traction, McDonald’s faces the pressing question: How does it plan to address this hurdle and turn things around?

Despite the challenges, not all news is bad at the Golden Arches. The chain’s $5 meal deal has driven increased traffic, prompting McDonald’s to extend the promotion through December. In July, the chain announced plans to pilot a beef burger that aims to rival the Big Mac, though a U.S. launch timelines remains unclear.

As McDonald’s moves forward, its ability to adapt and innovate will be crucial not just for regaining consumer confidence, but also for ensuring its place in an increasingly competitive fast-food landscape.