Wall Street cuts McDonald’s profit estimates on Russia costs

By Hilary Russ

NEW YORK (Reuters) – Wall Road analysts have slashed their forecasts for McDonald’s Corp’s 2022 and 2023 revenue, the newest signal that some Western firms stand to take a monetary hit as the prices of Russia’s invasion of Ukraine develop.

Morgan Stanley on Thursday mentioned it now expects internet revenue from the quick meals firm of $9.25 a share for this 12 months and $10.62 for 2023, reductions of 8% and three%, respectively, from its prior view.

Earlier, the analysis agency Gordon Haskett reduce its estimate by 5% in 2022 to $9.75 a share and by 3% for 2023 to $10.66 a share.

McDonald’s declined to touch upon the strikes.

The American burger chain – among the many first to open in Moscow within the post-Soviet period – is paying for leases and wages for its 62,000 workers in Russia, regardless of beginning to shut 847 eating places there, most of which it owns and operates. Additionally it is paying wages for its Ukraine workers.

The associated fee is predicted to be $50 million a month, or at the very least $450 million by way of the top of this 12 months.

Shops in Russia and Ukraine – which at the moment are shuttered – would usually generate working revenue of roughly $310 million yearly, based on Gordon Haskett.

The Chicago-based firm additionally faces potential hits to the worth of its property in Russia, whether or not by way of a mark down, sale to an area proprietor or authorities seizure, based on Morgan Stanley, which didn’t issue these into its lowered revenue estimates.

The financial institution nonetheless finds McDonald’s shares engaging as a result of they will maintain up in unsure client environments.

McDonald’s has extra publicity to Russia than different world fast-food chains. It entered the nation in 1990 and owns 84% of its eating places there.

Different manufacturers together with Starbucks Corp and Burger King are much less uncovered in Russia. Their eating places are largely owned by unbiased operators underneath joint ventures and grasp franchisee agreements.

After McDonald’s, Yum Manufacturers Inc, guardian to KFC and Pizza Hut, is most uncovered. Russia and Ukraine account for about 3% of its consolidated working revenue, Gordon Haskett analysts mentioned. That’s about $64 million based mostly on 2021 figures, based on a Reuters evaluation of Refinitiv knowledge.

Morningstar analysts haven’t modified their forecasts for McDonald’s or Yum. However on March 8, mentioned they’re involved about increased gasoline costs associated to the warfare and the influence on client spending and restaurant margins.

McDonald’s world working revenue reached $10.4 billion in 2021, Refinitiv knowledge confirmed.

Whereas McDonald’s has mentioned the Russia closures are short-term, Gordon Haskett analysts mentioned they imagine the shops in Russia with the long-lasting golden arches will stay shuttered into 2023.

(Reporting by Hilary Russ in New York; Modifying by Invoice Berkrot)

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