McDonald’s and GM Boast Positive Q4 Earnings to End 2022 on a High Note

Ba Da Ba Ba Bah, McDonald’s is lovin’ their Q4 earnings.

The golden arches were shining bright when McDonald’s reported their fourth-quarter earnings results Tuesday, January 31, 2023. Mcdonald’s beat Wall Street expectations of $5.75 billion in revenue with a reported $5.93 billion. U.S. same-store sales were up, and McDonald’s adjusted earnings per share were $2.59 versus the $2.44 expected.

Higher menu prices helped drive McDonald’s Q4 success. A successful marketing collaboration with Cactus Plant Flea Market had customers lining up in the late fall for limited-time Adult Happy Meals. And the fan favorite, the McRib, made its limited return in Q4 to add to McDonald’s strong sales.

Things were also looking bright in Detroit, where GM smashed expectations for Q4 earnings with $33.58 billion in revenue to close out a strong 2022. Looking ahead to 2023, GM predicts a strong sales year as supply-chain issues resolve and inventory levels return to normal.

Nikolay Osadchiy, Associate Professor of Information Systems & Operations Management at Emory’s Goizueta Business School, offered some perspective on these positive Q4 earning results and the factors driving them.

Nikolay’s Thoughts

“Financial markets have been doing well recently, and there are several factors explaining that in my opinion. First, supply chain pressures are easing and trade flows are starting to normalize, so that’s definitely great news, and markets typically react well to supply chains working smoothly.

The second reason is that the American consumer is proving to be fairly resilient. Even though there are some recent cuts in consumer spending that are observed in the data, still, consumer spending remains pretty high. And the third, of course, is that inflationary pressures appear to be easing as well, and the speed of rate hikes by the Federal Reserve is decreasing.

So that said, when we start thinking about individual stocks, the picture is a little bit more nuanced. For example, General Motors recently announced earnings and they beat expectations, the stock price increased. To me, this is mostly the story of supply and demand, so there was lots of residual unmet demand, people wanted to buy cars, but they couldn’t because of various shortages of inventory, of semiconductor chips. Now that supply chains have caught up, people can finally buy cars, and that translates to GM revenue.

Compare that with McDonald’s, for example. McDonald’s in my opinion is really the story of consumer resilience in the face of higher prices. So, despite increased prices, consumers still buy McDonald’s products and that translates to their revenue. Third, just yesterday, Meta had announced earnings and they beat on revenue, but that to me is mostly a story of cost-cutting on Meta’s side and also share buybacks.

So there is a variety of reasons that contribute to market movements. Going back to supply chains, yes, financial markets value supply chains. They like supply chains operating smoothly without glitches, and certainly, that has been factored in, but at the same time, there are a couple of other very significant factors in play, such as inflation, such as consumer spending, rising prices, and Fed policy. So what the net effect is going to be, remains to be seen.”

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