McDonald's continues to outperform
The burger chain's comparable global sales blew away analyst expectations for November.
The Home of the Golden Arches reported that global same-store sales increased 7.4% in November, surpassing the 4.6% gain Wall Street analysts expected. Sales in Europe and the U.S. rose 6.5% each, beating analysts' expectations. Not surprisingly, shares of the Oakbrook, Ill. company, which have risen more than 25% this year, rose 1.4% to $97.75 Thursday morning.
Post continues below.
McDonald's was ideally suited to profit from the economic downturn thanks to its dollar menu, which enables budget-conscious consumers to dine more outside the home. As the economy improves, so will the burger chain's chances to profit from premium-priced products such as lattes and mochas. The company is able to make money in places where many businesses struggle.
McDonald's cited strong performance in U.K., France, Russia and Germany as reasons for its strong performance in Europe, where it gets about 40% of revenue. That may be tough to maintain. Growth in the U.K. slowed in the three months ended in November. France, where joblessness is at a 12-year high, is experiencing similar problems. The German economy, Europe's largest, will likely contract over the next few months if Europe's debt crisis isn't resolved. Russian officials are forecasting growth of 4.2% this year.
But even if McDonald's European business slacks off, the U.S. and emerging economies may be able to make up the difference. Though it remains weak, the U.S. economy is gaining strength. Strong performance in China and Japan pushed up comparable sales in Asia/Pacific, Middle East and Africa by 8.1% in November.
Wall Street expects the good times to continue. The average target price of Wall Street analysts is $101.38, ahead of the $98.18 level where it recently traded. Its price-to-earnings ratio on a trailing basis is 18.9, under the S&P 500 average of 20.92, indicating that the shares are reasonably valued.
--Jonathan Berr owns a small position in McDonald's.
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.
The Federal Reserve and Congressional politics threaten to rain on the market party.
VIDEO ON MSN MONEY
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.