Tuesday will bring us reports from two giants in the dining industry as we look for McDonald’s (NYSE:MCD) Q2 2017 earnings before closing bell and Chipotle Mexican Grill (NYSE:CMG) Q2 2017 earnings after closing bell. McDonald’s is believed to have received a boost from the changes it’s been making to its menu and franchises.
However, Chipotle Mexican Grill management will likely have to face questions about the latest food-borne illness outbreak, a shadow they thought they had put in the past.
McDonald’s Q2 2017 earnings
Analysts are looking for McDonalds Q2 2017 earnings of $1.62 per share on $5.96 billion in revenue, compared to the $1.45 per share the fast food chain earned on $6.27 billion in sales. Wall Street predicts that McDonald’s will see growing profits as the year goes on with benefits from menu changes and guidelines at the franchise level. Analysts peg McDonald’s second quarter same-store sales growth at 3.7% in the second quarter.
According to analysts, the grading system McDonald’s introduced to its franchises last year has spurred more sales at stores that have been underperforming. RBC Capital analyst David Palmer said in a recent note to investors that he believes more than 1,000 locations in the U.S. have either recently been sold to a new franchisee or will soon be sold. He also believes that many of the stores that have been acquired recently are racking up double-digit growth in same-store sales.
Among the menu changes that have caught analysts’ eyes are the Signature Crafted Recipes, with Nomura Instinet analysts citing that and drink promotions as likely drivers of growth. RBC also called out the new menu, especially the move to fresh beef in the chain’s hamburgers.
The day before the McDonald’s Q2 2017 earnings were released, the fast food chain’s stock slumped by as much as 1%, falling as low as $152.40 during regular trading hours on Monday.
Chipotle Mexican Grill Q2 2017 earnings
Chipotle Mexican Grill Q2 2017 earnings are expected to come in at $2.19 per share on $1.2 billion in sales. Chipotle is back on the defense after a new outbreak of food-borne illness, this time at one of its locations in Virginia. This time, it’s an outbreak of norovirus, and it comes only a couple years after a series of food-related illnesses.
Several firms slashed their price targets for Chipotle Mexican Grill after the news broke. Sentiment around the fast-casual dining chain has plunged, according to Credit Suisse’s online sentiment tracker, falling to -11 on July 18 after being at 55 the day before. The firm added that this was even worse than the average score of 24 in December 2015 when Chipotle was plagued by E. coli and norovirus outbreaks at multiple stores. However, Chipotle management tried to assure customers that this is an isolated incident not caused by their food supply chain.
A day before the Chipotle Mexican Grill 2Q 2017 earnings report, the company’s stock ticked lower, having finally found a floor after falling by as much as 0.47% to $343.70 during regular trading hours on Monday. According to financial analytics firm S3 Partners, CMG short-sellers have gained more than $55 billion on the latest food safety crisis. Ihor Dusaniwsky, the firm’s research head, believes that as long as the incident remains isolated to the one location, a large amount of short sales should not be expected.