Sunday, July 24, 2011

MCD 2Q11 .. I'm Lovin' It

McDonalds Inc. reported 2Q earnings per share of $1.35, nearly 20% higher year-over-year and $0.07 greater then street expectation of $1.28. The earnings beat came on top of 16% revenue growth and the leveraging of fixed costs. Operating margin improved to 31.7% versus our forecast of 31.0% - showing that the company was able to offset rising inflationary costs through strategic pricing increases.

Top-line results were driving by larger than expected sales in the McCafe line-up, classic core offerings (Big Mac/McNuggets), and breakfast (Fruit & Maple Oatmeal). The strong comp numbers across every region suggest that the increase in pricing points is not affecting consumer demand. Consolidated same store sales were 4.5% for the quarter, led by the Asia/Pacific, Middle East and Africa segment.

The stock rose 2% on news of the beat and analysts across the street have begun to increase year-end estimates. CEO Jim Skinner said, "McDonald's ongoing momentum reflects our commitment to the customer. By providing relevant food and beverage choices in convenient, modern restaurants, we're giving customers more reasons to visit us more often.” Due to this momentum and unique global positioning, we remain bullish on shares of MCD. We are currently working to revise estimates and update price target in our model.


1 comment:

Roopa Bhopale said...

Great post- informative yet concise! I'm happy to see good news for MCD in the portfolio. It was my second semester in UASBIG and first pitch/shares bought in the Spring semester of 2010 :)