McDonald's poised for second-quarter surprise as upscale sandwiches boost sales

  • A survey of McDonald's franchisees estimates that same-store sales will be up 3.2 percent in the second quarter.
  • Nomura-Instinet has raised its same-store sales forecast on these results.
  • In addition, Nomura-Instinet has increased its target price by $11, to $172.
McDonald's Quarter Pounder hamburger
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McDonald's Quarter Pounder hamburger

McDonald's franchisees are feeling optimistic ahead of the company's earnings report next week.

A group of 26 domestic Golden Arches' franchisees, who own about 219 stores collectively, said in a recent survey by Nomura-Instinet that they expect same-store sales at their respective locations to be up an average of 3.2 percent in the second quarter.

Here's how their estimates break down by geographic zone for the second quarter:

Based on these results, Nomura-Instinet analyst Mark Kalinowski raised his same-store sales estimate for the company by 100 basis points, saying he expects the metric to be up 3.2 percent for the quarter. Wall Street's consensus estimate is for comparable sales to rise 3.1 percent.

"We believe that drivers of the U.S. business during Q2 included beverage promotions (such as $1 any size soft drinks) and the national launch of Signature Crafted Recipes (semi-customized burgers and chicken sandwiches)," Kalinowski wrote in a research note published Wednesday.

Nomura-Instinent polled the same domestic franchisees about third quarter 2017 and, in aggregate, they expect same-store sales to be up 3.3 percent.

Here's how their estimates break down by geographic zone for the third quarter:

Kalinowski bumped his same-store sales estimate up 100 basis points for the third quarter and now expects 3.3 percent growth.

He also increased his earnings-per-share estimate for the quarter by 1 cent to $1.74 and his full-year estimate by 3 cents to $6.43.

In addition, Kalinowski raised his target price by $11 to $172.

McDonald's shares were relatively unchanged Wednesday, trading hands at around $154.

The company reports second-quarter earnings on Tuesday morning.