Both MCD and WING reported strong 3Q22 and believe the momentum will continue. Staying LONG, both names
WING Earnings
Significant Momentum into 4Q22
WING reported systemwide domestic store comparable sales growth of 6.9% during the quarter, significantly better than the consensus estimate for +1.72%. System sales increased 17.7% to approximately $700 million, and opened 40 net new restaurants in 3Q22, leading to unit growth of 13.5%. Company-owned restaurant margins sequentially improved QoQ as they benefited from meaningful deflation in its core commodity, bone-in chicken wings. Adjusted EBITDA increased 33% to $28.4 million. Notably, the company said that most of the growth during the quarter was driven by an increase in transactions, which it said is a demonstration of the momentum and underlying health of the concept. Digital sales accounted for 62% of all sales during the quarter. COGS decreased to 37.2% from 48.1% last year. The decrease was primarily driven by a 42.7% decrease in the cost of bone-in chicken wings as compared to the prior year period. The company continues to execute unit openings too. Guidance: The restaurant operator boosts guidance for EPS to between $1.61 and $1.63 vs. $1.55 to $1.57 prior. Low-single-digit domestic same-store sales growth is anticipated, with net system-wide restaurant openings between 225 to 235 units and 220 to 235. To recap - Company-owned 4.3% vs FactSet +1.1%; System-wide domestic 6.9% vs FS +1.5%; Revenue - Royalty revenue & franchise fees $40.4M vs FS $38.6M; Advertising fees & related income $32.1M vs FS $31.3M; Company-owned restaurant $20.2M vs FS $20.7M; Cost of sales 78.0% vs FS 77.8% and year-ago 87.5%; Restaurant margin 22.0% vs FS 22.3% and year-ago 12.5%; EBITDA margin 30.6% vs FS 29.1% and year-ago 32.5%
MCD Momentum
McDonald's reports 3Q22 EPS $2.68 vs FS $2.58 and revenue $5.87B vs FS $5.70B. Total comps +9.5% vs FactSet +5.8%, reflecting positive comparable sales across all segments: U.S. increased 6.1%, International Operated Markets segment increased 8.5%, International Developmental Licensed Markets segment increased 16.7%. Consolidated revenues decreased 5% (increased 2% in constant currencies). Systemwide sales increased 2% (9% in constant currencies). Consolidated operating income decreased 7% (increased 1% in constant currencies). For the quarter, net income decreased 8% (1% in constant currencies) to $1.9 million, and diluted earnings per share decreased 6% (flat in constant currencies) to $2.68. Foreign currency translation negatively impacted $0.19 on diluted earnings per share. In the International Operated Markets segment, both periods reflected positive constant currency sales performance, driven by France and Germany, while results for the quarter also benefited from positive sales performance in Australia. Company-operated sales growth for both periods was more than offset by the impact of the permanent restaurant closures in Russia and the temporary restaurant closures in Ukraine. Results in the International Developmental Licensed segment for both periods reflected positive sales performance across all geographic regions in constant currencies, including China, due to restaurant expansion.
Management Comments:
"Our third quarter 2022 performance demonstrated broad-based business momentum as global comparable sales increased nearly 10%. I remain confident in our Accelerating the Arches strategy as our teams around the world continue to execute at a high level...As the macroeconomic landscape continues to evolve and uncertainties persist, we are operating from a position of competitive strength.
