updated 4/21/2005 9:58:06 AM ET 2005-04-21T13:58:06

McDonald’s Corp., the world’s largest fast-food chain, reported a 42 percent jump in first-quarter profits Thursday despite slower sales growth at its U.S. restaurants.

Improving sales in Europe and continued momentum in the United States fueled the latest strong quarter by the Oak Brook, Ill.-based company.

Net income for the January-through-March quarter was $727.9 million, or 56 cents per share, compared with $511.5 million, or 40 cents per share, a year earlier.

Results included a gain of $179 million, or 13 cents per share, due to a decreased tax rate and a charge of 3 cents per share because of a shift from share-based compensation to mostly cash-based compensation. Excluding those items, the company said earnings were 46 cents per share. That was 4 cents higher than the initial consensus estimate of analysts surveyed by Thomson Financial before McDonald’s announced last week it would top expectations.

Revenues were $4.8 billion, up 9 percent from $4.4 billion in the first quarter of 2004. Analysts had expected results of $4.71 billion.

Same-store sales, which measure results from restaurants open at least 13 months, were up 4.6 percent companywide for the quarter. That included 5.2 percent growth from a year ago in the United States, down significantly from the 14.2 percent leap registered in the first quarter of 2004. But the company noted that its U.S. business marked its 24th straight month of same-store increases in March, a feat not accomplished in nearly 25 years.

“We continued our positive momentum in the quarter with solid revenue and operating income growth,” said Chief Executive Officer Jim Skinner. “I am encouraged by the ongoing strength and resilience of our U.S. business.”

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