McDonald’s GAAP Results Were Miserable, CEO Doesn’t Try To Sugarcoat

This morning, 13 companies within the S&P 500 reported results for the third quarter. Nine of those companies beat the Estimize consensus, three missed and one met. The biggest surprise of the before-the-bell reports came from McDonald’s. Although they reported EPS of $1.51 ex-items, beating the Estimize consensus by $0.14, the GAAP result of $1.09 pales in comparison. CEO Don Thompson made no attempt to sugarcoat the weak results, saying “"McDonald’s third quarter results reflect a significant decline versus a year ago, with our business and financial performance pressured by a variety of factors - from a higher effective tax rate, to unusual events in the operating environments in APMEA and  Europe, to under-performance in the U.S., our largest geographic segment." Revenue for the quarter declined 5%, Non-GAAP earnings were down 1%, GAAP earnings were down 28% and same-store sales fell 3.3%.

This afternoon all eyes will be on Yahoo’s third quarter results, which are expected to top the Wall Street consensus by a small margin on the top and bottom line. The Wall Street Journal is also reporting that on Tuesday Yahoo CEO Marissa Mayer will announce a  “new plan” for the company’s turnaround strategy. Douglas MacMillan is reporting that Mayer will defend her spending on acqui-hires and offer to make fewer acquisitions in a exchange for larger ones which could move the needle on Yahoo’s fundamentals. After selling a portion of its Alibaba stake into the IPO Yahoo now has about $7B cash it could spend. In total 33 mergers and acquisitions predictions have been made about Yahoo on Mergerize.

How Are We Doing?

Expectations for S&P 500 earnings growth for the third quarter stand at 9.6%. Revenues are anticipated to come in with 4.4% growth. All 10 sectors are anticipated to post positive YoY growth on both the earnings and revenue front.

Leaders

Earnings:

Energy (13.6%). Notable industry: Oil, Gas & Consumable Fuels (14.5%)

Materials (12.7%). Notable industry: Metals & Mining (23.8%).

Consumer Discretionary (12.2%). Notable industry: Internet & Catalog Retail (22.5%)

Revenues:

Health Care (10.0%). Notable industry: Biotech (38.7%).

Information Technology (6.7%). Notable industry: Internet Software & Services (15.0%)

Laggards

Earnings:

Utilities (2.5%). Notable industry: Multi­Utilities (0.3%).

Telecommunication Services (1.7%): All five companies are within Diversified Telecom Services. Only Verizon posted y­o­y growth.

Revenues:

Energy (0.7%). Notable industry: Oil, Gas and Consumable Fuels (­-0.1%).

Materials (2.2%). Notable industry: Paper & Forest Products (­-10.9%).

Beat/Miss/Match

Earnings: 105 companies have reported thus far, 52% have beaten the Estimize consensus, 36% have missed and 12% have met. This is compared to Wall Street estimates, of which 67% of companies have beat on the bottom­-line, 26% have missed and 7% have met.

Revenue: 53% have beaten the Estimize consensus, 47% have missed, and 0% have met. For revenues, 60% of companies have beat the Wall Street estimate, while 40% have missed.