McDonald’s earnings fall short—find out what drove the surprise stock jump!

McDonald’s Corporation reported mixed financial results for the fourth quarter of 2024, falling short of Wall Street expectations despite modest growth in global same-store sales. The fast-food giant continues to grapple with declining U.S. sales, fluctuating international performance, and the financial impact of discount-driven promotions. However, investor optimism remained intact as McDonald’s stock rose 4.7% to $308 following the earnings announcement, reflecting confidence in the company’s long-term growth strategies.

Why Did McDonald’s Fourth-Quarter Earnings Miss Expectations?

For the quarter ending December 31, 2024, McDonald’s posted adjusted earnings of $2.83 per share, missing analyst expectations of $2.85, according to FactSet. The company’s revenue also fell short, reaching $6.39 billion, below the anticipated $6.45 billion​

. This marks a continuation of revenue challenges despite efforts to boost sales through aggressive promotions and new menu offerings.

Global comparable sales edged up 0.4%, outperforming forecasts that had anticipated a 1.1% decline. However, U.S. same-store sales dropped by 1.4%, driven by a decline in average check sizes. This decline was only partially offset by slight growth in guest counts. The contrast between U.S. and international markets highlights McDonald’s ongoing struggle to balance domestic market pressures with global expansion efforts.

What’s Behind the Decline in U.S. Same-Store Sales?

The U.S. market, traditionally a stronghold for McDonald’s, faced significant headwinds in the fourth quarter. The company attributed the 1.4% drop in U.S. same-store sales to a reduction in average spending per customer. Despite slight increases in guest counts, consumer caution amid persistent inflation and economic uncertainty has led to more conservative spending habits.

Moreover, McDonald’s had to contend with the aftermath of an E. coli outbreak in October 2024, linked to contaminated slivered onions in its popular Quarter Pounder burgers. Although the company swiftly addressed the issue by switching suppliers, the incident temporarily eroded customer confidence and negatively impacted sales during the critical holiday season.

How Are McDonald’s International Markets Performing?

Outside the U.S., McDonald’s experienced mixed performance. The International Operated Markets segment posted a modest 0.1% growth, while the International Developmental Licensed Markets segment delivered a stronger 4.1% increase, driven by robust sales in regions like the Middle East and Japan​

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However, the overall global sales growth masked underlying weaknesses. Some markets, particularly in Europe, showed signs of stagnation due to economic challenges and shifting consumer behaviors. The United Kingdom, for instance, faced declining sales, highlighting the variability in international performance.

Are Discount-Driven Promotions Helping or Hurting McDonald’s Profitability?

In an effort to combat sluggish sales, McDonald’s rolled out aggressive discount-driven promotions, including the widely marketed $5 meal deal launched in the summer of 2024 and the new McValue value meal introduced in January 2025. These promotions have been successful in attracting customers back to stores, with increased foot traffic reported following their launch.

However, while promotions boost short-term sales, they come at the cost of reduced profit margins. According to Peter Saleh, a restaurant analyst at BTIG, “deep discounts are not a winning recipe for sustained sales growth.” Saleh noted that discounted items now account for over a third of McDonald’s total sales, three times higher than historical averages. This shift suggests that while promotions may temporarily lift sales, they could undermine long-term profitability.

What Are Analysts Saying About McDonald’s Future Growth Prospects?

Despite the positive market reaction to the earnings report, analysts remain cautious about McDonald’s growth outlook. Saleh described the company’s same-store sales growth as “anemic”, citing inconsistent recovery patterns among franchisees following the E. coli incident. Some franchisees reported positive mid-single-digit growth by December, while others continued to struggle with negative sales figures.

Additionally, the company’s reliance on heavy discounting raises concerns about its ability to drive sustainable earnings growth. Saleh’s research suggests that McDonald’s may face ongoing challenges in achieving meaningful sales increases without further eroding its profit margins.

What’s Next for McDonald’s in 2025?

Looking ahead, McDonald’s plans to continue leveraging its “Accelerating the Arches” growth strategy, focusing on menu innovation, digital engagement, and culturally relevant marketing. The company also aims to expand its loyalty program, which generated $30 billion in systemwide sales in 2024, with over 175 million active loyalty users across 60 markets​.

While these initiatives show promise, McDonald’s faces significant hurdles, including rising operational costs, shifting consumer preferences, and intense competition in the fast-food sector. The company’s stock remains flat year-to-date, reflecting investor uncertainty about its long-term growth trajectory. However, with strategic adjustments and a focus on operational efficiency, McDonald’s may yet find a path to renewed growth in 2025 and beyond.