This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

McDonald's No Longer Overcooked

NEW YORK ( TheStreet) -- Fast food giant McDonald's (MCD - Get Report) is without a doubt the gold standard among its peers, a group which includes names such as Burger King and Wendy's (WEN - Get Report). For that matter, there are very few companies performing as well as McDonald's in any category -- including growing average annual sales by 6% while more than doubling its operating margins.

However, for as dominant as the company has been over the past decade, it rarely ever gets mentioned among the best-run operations on the market. But on the heels of a somewhat disappointing quarter, opportunistic investors may find long-term value as a result of a market's overreaction to the company's short-term hiccup.

Q3 Wasn't Juicy, but Still Edible

McDonald's reported third quarter net income of $1.46 billion, or $1.43 per share and missing analysts' estimates of $1.47 per share. The decline in net income by 3% year over year was particularly disappointing since it followed the second quarter, during which profits also fell off by 4.5%. On the other hand, revenue was impressive.

Although revenue dipped 0.2% year over year, the company managed to exceed estimates with sales reaching $7.15 billion vs. analysts' estimates of $6.94 billion. Consequently, sales totals were not enough to prolong the company's streak of four consecutive quarters of revenue growth.

Operating income was a little soft -- showing a 4% decline to $2.29 billion. Likewise, due to increased competition, operating margins registered at 32% -- shedding by 140 basis points. But impressively, same-store sales (comps) were not too adversely impacted.

U.S. restaurants produced comps growth of 1.2%. Similarly, comps in Europe also performed well. Despite the ongoing fiscal concerns abroad, the company enjoyed same-store-sales growth of 1.8%. This means that McDonald's has found ways to grow market share in the region despite stiff competition; 1.4% comp growth in the Asia/Pacific and Africa division was equally impressive.

Moving Forward

Overall, this was not a quarter of gourmet status, but the company didn't exactly burn the happy meal either. Operating income and margins were a little disappointing. Likewise, revenue fell 0.4% and 0.1% from company owned and franchise owned restaurants respectively, speaking to not only the effect of the global economic slowdown, but also the impact of competitive pressure -- all of which resulted in a 4% decline in total operating income.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
MCD $129.33 0.72%
WEN $11.22 0.09%
AAPL $94.19 -1.04%
FB $118.06 0.54%
GOOG $695.70 0.48%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs