McDonald's finally catches a break

The fast-food giant will see improved year-ago comparisons soon, and growth rates from 2012 will stop looking impossible to beat.

By Jim J. Jubak Mar 11, 2013 5:59PM
Friday’s announcement of February same-store sales from McDonald’s (MCD) shows what the company has been up against in the last few months. Same store sales fell 1.5% in the month from February 2012. That compares to a 7.5% year over year gain in same store  sales back in February 2012.

But the news on Friday also signals the coming end of the McDonald’s year-to-year comparison problem after March or so. That’s when year-to-year growth rates from 2012 stop looking impossible to beat. And the market reaction to the news—McDonald’s shares finished up 1.67% on the day Friday—shows that analysts have swung from too optimistic about McDonald’s revenues to a tad on the conservative side of just right.

Analysts had been expecting global same store sales to fall by 1.6% so the 15% decline actually looked pretty good.

And the year-to-year comparisons look even better when you note that last year February had an extra day thanks to leap year. Excluding that leap year effect, global same store sales actually climbed by 1.7%. (Don’t compare that 1.7% increase to the analyst consensus of a 1.6% drop and get too excited. The analysts also know that February 2012 had an extra day.)

U.S. same store sales were down 3.3%--or flat correcting for 2012’s leap day. European sales were down 0.5%--or up 2.7% correcting for 2012’s leap day. The Asia/Pacific, Middle East, and Africa grouping showed a drop of 1.6%--or an increase of 1.5% after correcting for leap day. Japan was especially weak but China showed positive year-to-year comparisons.

As of Friday I raised my target price to $106 from $104. The shares closed at $98.89 on Monday.

At the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. When in 2010 he started the mutual fund he manages, Jubak Global Equity Fund (JUBAX), he liquidated all his individual stock holdings and put the money into the fund. The fund may or may not own positions in any stock mentioned. The fund did not own shares of McDonalds as of the end of September. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here

Tags: MCD
Mar 11, 2013 6:43PM

What break? They can't even catch Fish! Ever try the Fish McBite?



Mar 11, 2013 9:47PM
their prices are way up, several offerings are doing poorly, new thinking is needed , new ideas, new drinks people can afford.....
Mar 11, 2013 11:20PM
What the hell is a Fish McBite...??
Mar 11, 2013 10:03PM
The anguish in the press about McD's February sales, when large parts of large population areas of the country spent a lot of time buried in deep snow, reminds me of when Cracker Barrel Old Country Stores had 30% of its restaurants in Florida in (1998? -or thereabouts) and forest fires in Florida closed many of them for weeks.  CBRL's sales and earnings fell and the stock fell from $20+ to $9 and analysts were singing Requiems over it.  I held on to my stock and, soon it was over $40 and over $78 now.  Until one of the competitors comes up with a model that breaks the mold McDonalds set and proves better, I don't see problems for McD's.  Some fast food outfit should add a sub bar with Italian Cheese Steaks, Gyros, Footlongs, etc. because my family -and obviously others from the lines- now often orders something like that from a sit-in or carryout restaurant instead of spending about the same amount for oversized fast food "meal deals."  A Chinese Restaurant a mile from me has $7.95 ($4.95 from 11-3 pm) huge 44 oz. combos of pork fried rice plus a huge portion of General Tso's Chicken (about 20 pieces!), or Lo Mein, or Shrimp in Garlic Sauce that is enough for two to pig out on.  They're also now a reasonable alternative to McD's, Wendy's, etc.
Mar 11, 2013 11:17PM
No I haven't been in there for a while....
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