McDonald's Corporation (MCD - Free Analyst Report), the iconic hamburger chain, has reported solid second-quarter results. Earnings came in at $1.13 a share, a couple pennies above our $1.11 estimate and 16% higher than the year-earlier figure. The gains were widespread, as all of the company's geographic segments reported increases in both operating income and comparable-store sales. Margins expanded, aided by higher comps and lower food costs. On balance, foreign currency translation had no effect on per share earnings.
In the United States, comps increased 3.7%, as sales were driven by beverages, including the company's new line of Frappes. Classic sandwiches and the Dollar Menu also performed well. Comps were even stronger across the Atlantic, climbing 5.2% in Europe, as new marketing strategies and remodeled restaurants helped drive traffic. Same-store sales increased 4.6% in Asia/Pacific, Middle East and Africa, with China and Australia leading the charge. Sales were boosted by extended hours and core menu items. All told, global comps were up 4.8%.
Although same-store sales were better than they were in the first quarter, the pace of revenue growth eased, which may have given investors pause. Overall, sales were up 5% year to year in the most recent three-month interim, compared with a 10% increase in the March period. Also, investor expectations were elevated, and the stock had been bid higher in the lead up to the report. As a result, it wasn't overly surprising to see the issue pull back a little following the earnings release.
Nonetheless, the company's outlook remains rosy. Indeed, management indicated that July comps were trending at least as well as second-quarter results, and we continue to look for 2010 earnings per share of $4.50. If achieved, this would represent a 13% increase over the comparable-2009 figure.
About The Company: McDonald's is a quick service restaurant with over 32,000 locations in more than 115 countries. The majority the restaurants (over 80%) are operated by franchisees. The company is best known for its hamburgers and french fries, but it has a diverse menu that includes breakfast items and an array of coffee-based drinks.