Monday, October 24, 2011

MCD 3Q Review .. 100 Consecutive Months of Positive Global Comps

McDonalds reported stellar third quarter earnings on Friday before the open. Revenue rose 13.7% to $7.1bn from $6.3bn in the year-ago period. Earnings rose to $1.45 per diluted share, a 12% increase from $1.29 last year. Sales were driven by growth across all areas of the world, and comparable same store sales of 5.0% versus 3.9% consensus.

MCD has increased prices two times this year to offset rising commodity prices (particularly beef), but management commented that prices at supermarkets are rising faster than restaurant prices which provides the company with some cushion. An increasingly diverse menu, with a focus on keeping prices competitive versus peers, has allowed McDonalds to thrive in the current environment – driving in-store traffic and allowing MCD to gain market share.

Jim Skinner, CEO, made some interesting comments regarding the economy and consumer. "We are officially out of the recession, but it hardly feels that way," he said. "Consumers everywhere continue to be cost conscious and hesitant to spend." Estimates are under review but results this quarter support our bullish thesis on shares of MCD. The stock traded up ~3% on the day and has increased ~20% so far this year.


No comments: