McDonald's blows past estimates -- again
The burger chain's solid earnings couldn't allay investor concerns about foreign-currency fluctuations, however.
Net income rose 11% to $1.38 billion, or $1.33 per share, versus $1.24 billion, or $1.16 billion, a year earlier. Revenue rose 10% to $6.82 billion. Analysts surveyed by FactSet had expected earnings of $1.30 on revenue of $6.8 billion.
Even those strong numbers couldn't hold off a drop in the stock price, however. Shares fell more than 2% as investors worried that foreign-currency fluctuations could take a bite out of profit. About 60% of McDonald's revenue is from international sales.
The company told analysts on a conference call that currency ups and downs could cut 2012 profit by as much as 18 cents a share, Bloomberg reported. The dollar has gained 9.5% against the euro in the last six months.
Comparable sales in the U.S. rose 7.1%, fueled by the popularity of premium chicken sandwiches and coffee. Comparable sales rose 7.3% in Europe and 6.9% in the Asia Pacific, Middle East and Africa.
Chief executive Jim Skinner plans to invest $2.9 billion to open 1,300 restaurants and to "reimage" more than 2,400 locations. McDonald's plans to add 2,500 jobs in the U.K. alone, where unemployment is growing. Skinner added that 2012 started off strong with sales growth in January of between 5.5% and 6.5%.
"I am confident that the investments we are making today will yield long-term value for our shareholders," Skinner said.
So are many investors. Shares of the house that Ronald built are up more than 30% over the past 52 weeks. As I have argued before, McDonald's is uniquely positioned to benefit from either an economic downturn, an improving economy or a stagnant one. Its diverse offerings, ranging from the dollar menu to expensive coffee, include something for consumers in a variety of tax brackets.
About the only thing that can slow McDonald's down is commodity prices, which the company forecasts will rise 4.5% to 5.5% in the U.S. and 2.5% to 3.5% in Europe. That's an improvement from an earlier forecast that projected increases of 4.5% to 5% for both the U.S. and Europe for 2012.
Analysts have an average 52-week price target of $104.76, near where it currently trades. Some investors may be worried that the shares are running out of gas. MCD shares were down in early trading. McDonald's, though, continues to prove naysayers wrong, indicating that those estimates may be conservative.
Jonathan Berr is a freelance business writer. He owns shares of McDonald's.
Hard to believe when they have the worst marketing campaign of all the fast food chains. Stop the TV ads and their income would probably rise another 10 percent, not to mention the millions they are wasting on the ads.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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