Is McDonald’s (MCD) Growing Again?

The world’s most famous fast-food chain, McDonalds’ (MCD) could be growing again.

For example, McDonald’s revenues grew by 4.10% in the quarter ending on 31 March 2023, Stockrow estimates. The revenue growth rate rose from -1.37% on 31 December 2022 and fell from 10.56% on 31 March 2022.

 Conversely, McDonald’s quarterly revenues fell from $5.927 billion on 31 December 2022 to $5.897 billion on 31 March 2023. In contrast, McDonald’s quarterly revenues rose from $5.666 billion on 31 March 2022.

Similarly, McDonald’s quarterly gross profit fell from $3.409 billion on 31 December 2022 to $3.314 billion on 31 March 2023. The quarterly gross profit rose from $3.050 billion on 31 March 2022.

Meanwhile, the quarterly operating income rose from $2.313 billion on 31 March 2022 to $2.583 billion on 31 December 2022. Plus, the quarterly income rose to $2.532 billion on 31 March 2023.

Can McDonald’s Grow?

McDonald’s (NYSE: MCD) still operates an impressive business. For example, there were 13,515 Mickey D’s locations in the USA on 29 March 2023, ScrapeHero estimates.

McDonald’s operates in 4,671 American cities, all 50 states, and four US territories. The largest McDonald’s footprint is in California where you can find the Golden Arches at 1,218 locations. Texas is close behind with 1,141 McDonald’s.

McDonald’s is growing worldwide. The number of McDonald’s (MCD) restaurants worldwide grew from 40,031 in 2021 to 40,275 in 2022, Statista estimates. McDonald’s global footprint grew from 34,480 restaurants in 2021.

Note these figures are inaccurate because McDonald’s pulled out of Russia because of the Ukraine War. McDonald’s operated 850 stores in Russia in February 2022, Statista estimates. Hence, I estimate McDonald’s worldwide footprint fell to 39,425 stores after the Ukraine invasion.

Thus, McDonald’s footprint grew by 244 before the Ukraine War but fell by 850 because of the conflict. I think it could take several years for McDonald’s to recover from the Ukraine War.

How Much Cash can McDonald’s Generate?

McDonald’s (MCD) can generate some cash. However, McDonald’s did not report cash number on 31 March 2023.

In contrast, McDonald’s reported a quarterly operating cash flow of $2.201 billion on 31 December 2022. The quarterly operating cash flow fell from $2.434 billion on 30 September 2022 and $2.667 billion on 31 December 2021.

Meanwhile, McDonald’s reported a quarterly ending cash flow of -$244.50 million on 31 December 2022. The quarterly ending cash flow fell from $955.80 million on 30 September 2022, $2.336 billion on 31 March 2022 and $403.40 million on 31 December 2021.

Thus, McDonald’s is generating some cash. Yet McDonald’s reported no cash and short-term investments figure on 31 March 2023. There was $2.583 billion in cash and short-term investments on 31 December 2022. The cash and short-term investments fell from $4.709 billion on 31 December 2021.

How Much Debt Does McDonald’s have?

Hence, McDonald’s (MCD) has less cash. I think this hurts the value case for McDonald’s. McDonald’s has what I consider an undeserved reputation as a value investment.

McDonald’s did not report its debts on 31 March 2023. However, it reported $36.565 billion in total debt on 31 December 2022. The total debt rose from $36.828 billion on 31 December 2021. McDonald’s is paying debts, it reported a -$1.517 billion quarterly financing cash flow on 31 December 2022.

Thus, McDonald’s has less cash and more debt. Yet, McDonald’s could have more value. It reported no Total Assets figure on 31 March 2023 and $50.436 billion in Total Assets on 31 December 2022. McDonald’s has lost value, its Total Assets fell from $53.854 billion on 31 December 2021.

Russian McDonald’s Survives sort of

I think McDonald’s assets fell because of the Russia pullout. McDonald’s (MCD) left the Russian Federation in May 2022 after 32 years. The pullout cost McDonald’s 9% of its revenues and a $1.4 billion charge, the CBC reports.

Strangely, many Russian McDonald’s are still operating the brand name Vkusno & Tochka, which translates to “Tasty and that’s it,” CNN reports. Vkusno & Tochka’s director general Oleg Paroev wants to reopen all 850 locations and add new restaurants.

Hungry Russians can find favorites such as cheeseburgers, fries, and fish burgers, at Vkusno & Tochka. However, McDonald’s signature items such as Big Macs, Egg McMuffins, and Filet O’ Fish are missing from the new menu.

Thus, somebody (probably Paroev and Chinese investors) will make money from Russian McDonald’s, but McDonald’s investors will not. Once again, US sanctions hurt an American institution as Russia’s oligarchs and their Chinese masters laugh all the way to the bank.

Is McDonald’s (MCD) a Value Investment?

I think McDonald’s (MCD) is not a value investment because Mr. Market overpriced it at $295.16 on 4 May 2023. I see nothing in McDonald’s financial numbers that justifies that price.

McDonald’s share price rose from $252.94 on 5 May 2022. Thus, Mr. Market still likes McDonald’s even as it loses value.

One reason Mr. Market loves McDonald’s is its attractive dividend. McDonald’s has scheduled eight $1.52 quarterly dividends between 2 June 2023 and 28 February 2025. McDonald’s shares offered a $6.08 forward dividend and a 2.06% forward dividend yield on 4 May 2023.

I recommend investors avoid McDonald’s because there are better and cheaper dividend stocks out there. In the final analysis, I cannot view McDonald’s as a value investment.