Monday, January 30, 2012

MCD 4Q Review

McDonalds posted strong earnings on Tuesday and record-breaking revenue for fiscal 2011. In the fourth-quarter, revenue rose 10% to $6.82 billion from $6.21 billion. Fourth-quarter earnings were $1.33 per share, up from $1.16 per share a year earlier. Sales were driven by new menu items, longer operating hours, and effective marketing strategies.

The results failed to quell fears that 2012 margins could be negatively affected by exchange rates. In 2011, foreign exchange raised McDonalds earnings by 19 cents a share. Analysts predict that this will snap back in the coming year, as exchange rates work against the company. Also, higher taxes and increased spending on restaurant renovations will hurt margins in 2012.

McDonalds is hoping to steal some market share away from KFC (owned by YUM! Brands). On Tuesday, McDonalds unveiled Chicken McBites, almost identical to KFC’s Popcorn Chicken:

In Tuesday’s conference call, CEO Jim Skinner commented that a 5.5% rise in commodity prices are expected to hurt earnings as well. On Tuesday, the stock traded down 2% to $99. UASBIG estimates are currently under review.

Joe Esposito

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