Restaurant operator and Dow-30 component McDonald's (MCD - Free McDonald’s Stock Report) has reported better-than-anticipated fourth-quarter results, which has caused the stock to climb slightly in mid-morning trading. The company earned $1.38 a share on revenues of $6.952 billion, versus our estimates of $1.32 and $6.885 billion, respectively. Year to year, the bottom and top lines grew 4% and 2%. The quarter got off to a rough start in October, a month when global comparable-store sales slipped 1.8%, the first such decline in nine years. November saw more strength, however, and comps rose 2.4% that month. All told, fourth-quarter same-store sales eked out a gain of 0.1%.

Overall, December-period results were hurt by a number of factors, including a still-challenging global economic backdrop and increased competition from other quick-service rivals. These headwinds worked to offset positive benefits from the Monopoly promotion, local Dollar Menu advertising, breakfast, and limited-time sandwiches, such as the Cheddar Bacon Onion burger and the McRib.

Breaking down the quarter by geography, the United States was the company's strongest region. Comps rose 0.3% on our shores, as McDonald's strategy of balancing everyday value with premium menu options appeared to resonate with consumers. In Europe, same-store sales fell 0.6% because of reduced guest traffic and difficult year-to-year comparisons. The United Kingdom and Russia were relative outperformers, but were overshadowed by weakness elsewhere on the Continent. Finally, comps slid 1.7% in the region comprised of Asia/Pacific, the Middle East, and Africa. Weakness in Japan and unfavorable currency movements were partly to blame.

Although comps rebounded later in the fourth quarter, that doesn't necessarily mean it will be smooth sailing for McDonald's in 2013. The slow and uneven economic recovery is making consumers scrutinize all of their purchases, and the end of the payroll tax holiday has begun to take a bite out of paychecks. Meantime, stepped-up competition and revamped menus from the likes of industry peers Burger King (BKW) and Yum! Brands' (YUM) make it tougher to win diners dollars. Moreover, McDonald's faces difficult comparisons, especially early in the year, due to the strong results it posted last spring thanks, in part, to unseasonably warm weather. Indeed, management indicated that January comps were trending lower and would likely land in negative territory for the month.

For the time being, our 2013 earnings estimate is unchanged at $5.75 a share. While the restaurant will likely face challenging operating conditions this year, menu innovation, compelling value and convenience, and new and remodeled restaurants should help drive a bottom-line gain of between 5% and 10%. All told, we continue to believe that these shares are a good selection for conservative, income-oriented investors.

About The Company:McDonald's is a quick service restaurant with more than 33,500 locations in 119 countries (as of December 31, 2011). The majority of the restaurants (over 80%) are operated by franchisees or affiliates. The company is best known for its hamburgers and French fries, but it now has a diverse menu that includes breakfast items and an array of coffee-based drinks.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.