By Evie Liu

Discounts and promotions from McDonald's might attract more customers back to its restaurants, but they might not be helpful to its earnings.

McDonald's is set to post quarterly results on Monday before the market opens. For the three months ended in December, analysts polled by FactSet expect the firm to post $2.85 in earnings per share and $6.45 billion in total revenue.

While revenue is expected to come slightly higher than the year-ago period, earnings estimates are 3.4% down from a year ago. The fast food giant rolled out a series of discounts and promotions over the past few quarters, which could have cut into its profit.

The stock is largely flat year to date, but has come down 6.6% from the recent high reached in October.

McDonald's has been trying to refuel growth in response to sluggish sales as consumers pulled back from restaurant spending amid inflation pressures. The company launched a $5 meal deal in the summer, along with other promotions, that have attracted some diners back in stores.

But an October E. coli outbreak linked to the slivered onions in its Quarter Pounder burgers scared some diners away, adding pressure on the chain again. The company has since secured an alternate onion supplier and resumed the sale of Quarter Pounders.

For 2024's third quarter, McDonald's reported earnings and revenue that both beat estimates and came higher than the year-ago period. Still, same-store sales declined from a year ago due to weakness in the international markets.

The Golden Arches has more deals planned for 2025. On Jan. 7, it introduced the McValue value meal that allows diners to buy one item and add another one for $1 from a selected menu. Food traffic and sales were already up following the launch, according to Gordon Haskett Research Advisors.

Still, Peter Saleh, restaurant analyst at BTIG, expects McDonald's same-store sales in the fourth quarter to remain "anemic," owing to "the food safety incident in late-October, varied sales recovery and bitterly cold weather in January."

"We continue to believe that deep discounts are not a winning recipe for sales growth," the analyst wrote in a note on Monday.

According to BTIG's survey of McDonald's franchisees, sales recovery since the E. coli incident has been mixed, with some operators returning to positive mid-single digits by December, while others remained negative.

The analyst noted that discounted items now account for over a third of McDonald's total sales, three times its historical mix. "We remain on the sidelines as we see few catalysts to drive earnings outperformance in the coming year," he wrote.

Write to Evie Liu at evie.liu@barrons.com

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February 09, 2025 16:00 ET (21:00 GMT)

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