McDonald’s (MCD) Reports First Increase in U.S. Sales in Two Years

Shares of McDonald’s Corporation (MCD) were up +6.81 or +6.64 percent to $109.35 in Thursday’s premarket after the company announced third quarter earnings that beat estimates by a wide margin early this morning. McDonald’s Corp. Stock closed at $102.54, down -1.30 or -1.25 percent in Wednesday’s regular trading session.

Oak Brook, Illinois based McDonald’s Corp. is the world’s largest chain of fast food hamburger restaurants.
The company serves approximately 69 million customers eating at their restaurants in 100 countries worldwide. More than 80 percent of all McDonald's restaurants are owned and operated independently. The company licenses franchises and affiliate ownership collecting rent, fees and royalties paid by the franchisees. To own a franchise, in addition to a large capital outlay, prospective franchisees must attend intensive courses at “Hamburger U”, McDonald’s Chicago area training facility.

For the company’s fiscal third quarter, McDonald’s reported it had earned $1.31 billion or $1.40 per diluted share, compared to $1.07 billion or $1.09 per share up +28 percent from one year ago (+44 percent in constant currencies). The increase was due in part to a benefit related to a comparison in last year’s increase in tax reserves in relation to certain foreign tax issues.

Revenue for the quarter came in at $6.62 million, down from $6.99 million in the same period one year ago. The five percent decline in revenue was in large part due to currency translation, McDonald’s consolidated revenues increased seven percent in constant currencies.

Consolidated Operating Income declined two percent in the quarter, but increased +10 percent in constant currencies. Analysts were predicting the company would report earnings of $1.28 per share on revenue of $6.41 billion.

Steve Easterbrook, McDonald's President and Chief Executive Officer said in the company’s press release that, “I am encouraged by our operating performance for the quarter, with positive comparable sales across all segments, including the U.S., as well as sales recovery in China following the prior year supplier issue. I am confident in the fundamental strength of the McDonald's System and our ability to drive initiatives that are focused on delivering the greatest benefit for our customers.”

McDonald’s reported global comparable store sales increased +4.0 percent in the quarter with positive comparable sales in all segments. U.S. comparable store sales increased +0.9 percent, its first increase in two years. U.S. third quarter income declined by one percent due to the company’s incremental investment in benefits and wages for all company operated restaurant employees.

The International Lead Markets segment showed a comparable sales increase of +4.6 percent in the quarter with strong results from the UK, Canada and Australia with positive results from Germany. Sales in the High Growth Markets segment increased +8.9 percent with strong comparable sales results from China with an increase of +39 percent in operating income (68 percent in constant currencies).

Chief Executive Easterbrook ended his statement saying, “As we begin fourth quarter, comparable sales are expected to be positive in all segments. While still in the early stages, we believe our turnaround plan is starting to generate the change needed to reposition McDonald's as a modern, progressive burger company.”

McDonald’s stock has been gaining steadily this year and will open well above its yearly high of $105.20 this morning as investors react to the positive earnings news.

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Published on Oct 22, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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