McDonald's stock hits an all-time high

Shares of the fast-food chain reach $80.79 ahead of Wednesday's report on November sales.

By TheStreet Staff Dec 7, 2010 3:16PM

thestreetBig Mac © McDonald'sBy Miriam Marcus Reimer, TheStreet


McDonald's (MCD) shares pushed up to an all-time high of $80.79 Tuesday afternoon as investors anticipated a strong report on November sales.


The global fast-food chain is due to report its November monthly sales figures on Wednesday. Analysts' consensus is for the Golden Arches to report U.S. same-store sales growth -- or sales at stores open at least one year, a closely watched metric in the restaurant industry -- of 5.1% for the month.


Deutsche Bank analyst Jason West expects McDonald's to report U.S. comps growth of 5% for November, compared with a 0.6% decline in the year-earlier month.


"We look for U.S. momentum to continue in November as compares ease slightly versus October and helped by national McRib (limited-time offering) and softening competitive environment," he said.

In Europe, West expects McDonald's to report 3.5% comps growth for November, below the consensus for same-store sales growth of 4.9%. In Asia/Pacific, Middle East and Africa he expects to see growth of 6%.


In October, McDonald's grew global comps by 6.5%. By region, October comps grew 5.6% in the U.S., 5.8% in Europe and 5.3% in Asia/Pacific, Middle East and Africa.


For the third quarter McDonald's beat top- and bottom-line expectations, growing profits by 10.3% to $1.39 billion and revenue by 4.1% to $6.3 billion.


McDonald's said its nationwide promotion of McCafe Frappes and Smoothies, plus the everyday affordability of its Dollar Menu, helped boost sales in the quarter.


Investors should continue to keep a close eye on food costs, which are generally going up, Janney Capital Markets analyst Mark Kalinowski said in an appearance on CNBC. He pointed out that McDonald's gross margins were better than expected in the recent quarter, an indication that the company is addressing any qualms shareholders may have with its fundamentals.


Kalinowski explained that fast-food operators like McDonald's are typically better able to cope with rising commodity and other input costs because of their highly franchised model of operations. Franchisees bear the brunt of higher food costs, not the franchisor, he said.


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Dec 7, 2010 9:46PM
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