By Steven Russolillo 

Judging from the share price of McDonald's Corp., all-day breakfast can only do so much.

After a strong start to the year, shares of the world's largest fast-food chain have fizzled since May along with those of many competitors. Third-quarter results out Friday probably won't change the trend.

Analysts polled by FactSet estimate earnings of $1.48 a share, up 6% from a year ago. Revenue is anticipated to have slipped by 5.1% to $6.28 billion. And global same-store sales are expected to have risen by just 1.3%.

While that would mark the fifth consecutive quarter in positive territory after four quarters in the red, it also would be the slowest pace of growth during its recent renaissance. Analysts at Nomura are even more pessimistic based on their franchisee surveys, saying same-store sales growth might struggle to stay positive.

McDonald's has implemented a number of changes under chief Steve Easterbrook, who took the helm in March 2015. The move to all-day breakfast, which began a year ago, was the biggest. It had an immediate impact, fueling stronger growth and higher traffic in the months that followed.

But even the most important meal of the day won't save McDonald's from its bigger problems. Many consumers are gravitating toward rivals offering fresher ingredients and custom-made meals. As The Wall Street Journal reported earlier this month, only one in five millennials has even tried a Big Mac. Many prefer gourmet burgers.

More broadly, many dining chains are hurting from what some call the "restaurant recession." Sales growth at food and drinking establishments, including restaurants, has slowed markedly since the beginning of 2015, according to the Commerce Department. Average growth over a three-month period through September slowed to 5.6% from a year ago, the lowest since spring 2014.

McDonald's shares have slumped 16% since May and currently trade near their lowest level of the year. That could present a short-term opportunity if results clear low expectations.

But gains might prove fleeting. Analysts expect same-store sales growth to slow further in the coming quarters. Meanwhile, a projected earnings multiple of 18 times is no bargain.

These arches aren't as golden as the used to be.

 

(END) Dow Jones Newswires

October 20, 2016 15:28 ET (19:28 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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