McDonald's is expected to report its second-quarter results Wednesday before the bell, sharing progress on its international recovery and whether it met investors' high expectations for its U.S. sales. A year ago, the fast-food giant's quarterly revenue sank 30% as temporary restaurant closures and stay-at-home orders hit sales. Thanks to its drive-thru lanes and cheap meals, however, business began bouncing back by the summer months. Last quarter, the company reported global same-store sales growth that surpassed 2019 levels, buoyed by strong performance in the United States. In other regions, the recovery has been more uneven, as some markets saw new rounds of lockdowns. Shares of McDonald's have risen 14% this year, giving the company a market value of $189 billion. The company's share price also hit a fresh high on Tuesday, leaping to $247.05. However, the stock's performance has lagged that of the S & P 500 , which has climbed nearly 17% in 2021. Investors have been picking full-service restaurant stocks like the Cheesecake Factory and Applebee's owner Dine Brands as a recovery play rather than fast-food stocks, which rebounded relatively quickly last year. McDonald's stock is trading at roughly 28 times its forward earnings. At that valuation, it's more expensive than Burger King owner Restaurant Brands International , which is trading at 24 times its forward earnings, but cheaper than Wendy's , valued at 31 times its forward earnings. On Tuesday, Guggenheim called McDonald's its best idea , with a price target of $270 per share after initiating coverage on eight different fast-food stocks, including Restaurant Brands and Wendy's. Wall Street analysts surveyed by Refinitiv are forecasting earnings per share of $2.11 — more than triple its earnings a year ago — on revenues of $5.6 billion. Since April, analysts have raised their revenue estimates by an average of 2%, according to Refinitiv. If McDonald's meets or beats those expectations, it would be the second consecutive quarter where the company tops 2019 levels. As McDonald's reveals its latest results, investors should pay attention to these four key areas: 1. U.S. same-store sales growth McDonald's home market has been its strongest segment during the pandemic, with its same-store sales turning positive during its third quarter in 2020. Last quarter, U.S. same-store sales outpaced pre-pandemic levels, a trend that executives said they expected would occur again during the second quarter. The chain's new chicken sandwich , which launched in late February, is expected to have boosted U.S. same-store sales growth. Credit Suisse estimates that the menu item is contributing roughly 4% to same-store sales, based on data indicating that each restaurant is selling roughly 150 of the sandwiches every day. McDonald's franchisees have also been reopening their dining rooms, although CEO Chris Kempczinski said at CNBC's Evolve conference that the return of dine-in customers could take longer. As it waits for those sales to come back, the chain has seen massive growth in its digital sales and drive-thru orders at U.S. restaurants. One challenge for the chain's U.S. restaurants has been labor. In May, McDonald's announced higher wages for workers at its company-owned restaurants, which represent less than 5% of its U.S. footprint. A survey of franchisees by Kalinowski Equity Research found that respondents believed on average that they lost sales due to difficulty finding enough workers. 2. A BTS bump? Since the successful Travis Scott meal promotion in September, McDonald's has been leaning on celebrities' name recognition to reintroduce consumers to its core menu items, like the Quarter Pounder burger or McNuggets. The "famous meals" promotion with K-pop supergroup BTS is expected to be no different. Analysts expect the meal contributed to same-store sales growth during the quarter, although estimates vary. The BTS meal included McNuggets, a medium order of fries, medium-sized drink and Korean-inspired dipping sauces. It rolled out in almost 50 different countries, including the United States. One Indonesian city temporarily closed several McDonald's restaurants after the high demand for the BTS meal fueled concerns about a possible Covid outbreak. Some enterprising fans have been selling the paper bags and sauces that come with the meals on eBay. 3. International recovery Last quarter, new lockdowns outside of the U.S. hampered McDonald's recovery, pressuring same-store sales growth. Restrictions weighed on France and Germany, two of the company's largest international markets. McDonald's international operated markets segment, which includes the United Kingdom and Australia and accounts for a larger chunk of the company's revenue, has lagged behind its international developmental licensed markets, which include China and Japan. Operated markets are wholly owned by McDonald's, and the company operates those restaurants. Meanwhile, licensed markets are under the control of a master franchisee. During the second quarter, the pattern could repeat itself as the resurgence of new Covid cases — driven by the delta variant — has led some countries to reintroduce restrictions or even reinstate lockdowns. 4. Covid-19 delta variant The company said last quarter it expects 2021 systemwide sales growth in the mid-teens. However, a lethargic international recovery or slowing U.S. growth due to the Covid delta variant could push McDonald's to revise its forecast downward. The seven-day average of new Covid cases surpassed 62,000, according to CNBC's analysis of Johns Hopkins University data. That's up 57% from a week ago. The Centers for Disease Control and Prevention is expected to reverse its policy on fully vaccinated people wearing masks indoors amid the new wave of cases.
The sign at the McDonald's restaurant on Penn Ave in Sinking Spring, PA April 8, 2021 with a message on a board below it that reads "Work Here $15 And Free Meals".
Ben Hast | MediaNews Group | Getty Images
McDonald's is expected to report its second-quarter results Wednesday before the bell, sharing progress on its international recovery and whether it met investors' high expectations for its U.S. sales.