McDonald's blows past estimates -- again

The burger chain's solid earnings couldn't allay investor concerns about foreign-currency fluctuations, however.

By Jonathan Berr Jan 24, 2012 11:28AM
McDonald's (MCD) reported better-than-expected fourth-quarter results Tuesday, fueled by strong performance around the world.

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.
Tags: MCD
15Comments
Jan 24, 2012 1:23PM
avatar
Sounds great!  Now please tell me why the hell is the stock down almost 2%?  Nah, there's no manipulation...
Jan 24, 2012 4:29PM
Jan 24, 2012 3:47PM
avatar
So the stock drops $2.30 a share on great news. The market is a joke. The logic is the did so well this quarter they can't repeat so time to lower the price?
Jan 24, 2012 2:44PM
avatar
McDonalds is growing, as are the customers that it serves.
Jan 24, 2012 2:49PM
avatar
A few of you can complain all you want about  food in the food chain. I would be more concerned about children starving or being abused. Not some story about chicken bred to be used for food. I eat now and then at McD's and have no issue about it. I also invest in the company, where I am turning a very nice profit...for my kids and their college. If ya don't like the company, so be it. I do though and I invest MY money as I see fit.
I wonder how many of you invest in foreign companies that benefit no one in the USA?
Jan 24, 2012 4:34PM
avatar
Since there are so many people unemployed or barely hanging on to their jobs going to better restaurants or even buying food at the store is very costly.  All the prices of food at the store have gone up significantly so I guess if you can get a "Happy Meal" for 5 dollars it is cheaper than preparing something at home....although the food at any fast food place is not that healthy people are just trying to get by day to day.
Jan 24, 2012 3:24PM
avatar
What about a split? I want to cash in some MCD profits but got a hunch a split is coming. More shares is better right?
Jan 24, 2012 1:14PM
avatar
I suppose that one day plastic cups will be banned, at least the type that are used at all quick-eat places, unless someone comes up with a cup that disintegates within a week or two.  Plastics are a great profit making product, but down the road plastics will figure into destroying landfills and the environment.  I'm no "greenie," but things are getting out of control.  If milk were sold in glass containers, I would certainly buy that product just as much as any drink that comes in a plastic bottle.  People buy beer and hard liquor in glass bottles, why not other drinks? 
Jan 24, 2012 6:42PM
avatar
US dollar is the place to be. The debt is denominated in US dollars. Borrowers will sell everything to find dollars. If they don't, their creditors will. Prices are about to crash! Google for deflationary crash to understand why.
Jan 24, 2012 9:13PM
avatar
There is a lot of negativism regarding this iconic giant.  You don't have to eat there by choice but you can purchase shares in this extremely hot stock, so hold your onions. McDonalds has been a shining star during these difficult economic times. I too would love to see a split to advance my portfolio even further. Go McDonalds! How is that said in Chinese?

Jan 24, 2012 5:33PM
avatar
I was in McDonald's the other day for the first time in four or five years and I could not believe how much "fat food" had gone up in price. The quality of their simple cheese burger tasted more like it had a paper filler than hamburger but their coffee was great but expensive.
Jan 24, 2012 12:43PM
avatar
A remodeled "green" McDs in my homecity of over 310,000 is the busiest eaterie...doesn't say much for cuisine, does it?  Jon Huntsman's father invented the white foam clam shell Big Mac box over 30 yrs ago for founder Ray Kroc and pop is a billionaire, needless to say.  Now the white containers are found in every "sanitary landfill" (a classic oxymoron like sober alcoholic and military intelligence, et al) around the planet.  No wonder Huntsman never mentioned the environment in his run for the top job.  Sure, I have a cheap senior coffee at McDs at times on my way to work...one good thing about being over 65. 
Jan 24, 2012 2:25PM
avatar
OMG! It's pretty simple to see why their profits have gone up. McDonalds has consistently raised their prices to outrageous levels. It amazes me people eat that stuff they call food. So when the same number of people eat it and they raise the prices then- Viola, more money! People need to stay away from their food.
Jan 24, 2012 1:45PM
avatar

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.

Jan 24, 2012 2:32PM
avatar
I cant believe people eat this crap.  Its so bad for you, inhuman, and just wrong.  Factory farms are evil and you are what you eat. McDonalds is the most corrupt corporation , next to the oil companies.  Next time you kids wants a Chicken McNugget tell him the chicken died by probably being drowned in boiling water, after living it's 27 days in darkness, being kicked around by Mexican workers. A Nightmare
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120
120 rated 1
268
268 rated 2
439
439 rated 3
709
709 rated 4
641
641 rated 5
609
609 rated 6
640
640 rated 7
516
516 rated 8
272
272 rated 9
152
152 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
EXCEXELON CORPORATION10
TAT&T Inc9
VZVERIZON COMMUNICATIONS8
CTLCENTURYLINK Inc8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.