McDonald's raises earnings outlook

/ Source: The Associated Press

Strong sales worldwide, including a double-digit increase last month at its U.S. restaurants, helped boost McDonald’s Corp.’s third-quarter profits well above Wall Street estimates, the company said Wednesday.

The hamburger giant said that its per-share profits for the quarter will top last year’s by about 42 percent, due in large part to impressive sales figures for September. Its earnings estimate of 61 cents per share is 12 cents higher than the consensus estimate of analysts surveyed by Thomson First Call.

McDonald’s said earnings, which are due out next Tuesday, will be include 7 cents per share from a tax benefit from an international transaction and other items. Chief executive Charlie Bell also cited robust U.S. sales numbers, which he credited to a combination of new menu items, longer restaurant hours, stronger marketing, and improved service and food quality.

September sales results showed gains of 10.6 percent at U.S. comparable stores — restaurants open 13 months or more — and 7.3 percent for comparable sales worldwide. For the third quarter, comparable sales were up 8.5 percent at its more than 13,000 U.S. restaurants over the same period of 2003 and 5.8 percent worldwide.

U.S. comparable sales are up 10.4 percent so far this year as the Oak Brook-based company continues a comeback from an extended slump that ended early last year after it shook up its management and cut back on rapid expansion to focus on better performance at its restaurants.

Driven by the U.S. showing and the revised strategic focus, Bell said, “worldwide comparable sales have been positive for six consecutive quarters and our profitability continues to improve.” He noted that the U.S. sales increases came despite hurricanes and heavy rains that affected results in eastern and southern regions.

J.P. Morgan analyst John Ivankoe said in a note to investors that he was “impressed by the domestic business’s ability to continue to deliver solid traffic and average ticket gains on top of difficult year-ago comparisons.”

The U.S. gains more than offset another lackluster showing in Europe, where McDonald’s sales were flat for the third quarter. Comparable sales in Europe declined 0.6 percent for September and finished 0.3 percent higher for the quarter; they are up 2.7 percent for the year.

High unemployment and stagnant economic growth in several countries, most notably Germany, are still hurting European sales, McDonald’s said. Sales were somewhat higher for the month and quarter in France and Britain, two other key markets.

Sales remained solid in McDonald’s other big international region, rising 7.3 percent last month and 5.4 percent for the July-through-September quarter at its established restaurants in Asia, the Middle East and Africa.

Fast food giant McDonald’s says earnings this quarter will be better than forecast, thanks to rising sales and a lower tax bill.

It is telling investors to look for a per-share gain of 61 cents, which is 12 cents above the consensus among analysts following the company.

Sales for McDonald’s restaurants open 13 months or more were up seven percent last month, and even better than that within the U-S.

It notes that achievement was seen despite hurricanes and other bad weather that affected the eastern and southern U-S over the past several months.

McDonald’s is scheduled to report earnings next Tuesday.