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McDonald's: Dynamics of Current Environment Will 'Persist'

NEW YORK (TheStreet) - McDonald's (MCD - Get Report) shares were slipping in pre-market trading after the fast-food chain posted meager growth rates for the third quarter and indicated that it expects those trends "to persist" in the final quarter of the year.

The Oak Brook, Ill.-based company reported third-quarter net income of $1.52 billion, or $1.52 a share, a 5% year-over-year increase. Revenue rose 2% to $7.32 billion. McDonald's global comparable sales rose 0.9%.

Analysts, according to Thomson Reuters, expected the fast-food chain to post earnings of $1.51 a share on revenue of $7.34 billion.

Shares were falling 1.7% to $93.52 in pre-market trading.

U.S. comparable sales rose a meager 0.7% in the quarter, while operating income rose 5%, the company said. U.S sales were propped by McDonald's popular Monopoly promotion. 

Last month, McDonald's kicked off new "Mighty Wings" menu items, featuring bone-in wings sold in 3, 5 and 10 pieces, with prices starting at $2.99. The promotion will go through the end of November.

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"Looking ahead, the U.S. is focused on fortifying its value leadership position and leveraging recently introduced chicken, beef and beverage options to enhance sales and profitability," the company said in the release.

European comparable sales inched 0.2% higher. Operating income for the region rose 11% (8% in constant currency) reflecting strong performance in the U.K. and Russia and solid results in France, but offset by Germany.

Comparable sales in McDonald's Asia/Pacific, Middle East and Africa (APMEA) region declined 1.4% for the quarter, with operating income slumping 12% (4% in constant currency) specifically tied to weakness in China, Japan and Australia. McDonald's partially attributed the lower results to the ongoing challenging environments in those areas.

There, McDonald's "remains aligned behind the key priorities of accelerating growth at the breakfast and late-night dayparts, enhancing local relevance and broadening accessibility with branded affordability, expanded conveniences and new restaurant openings."

McDonald's expects the "dynamics of the current environment to persist."

Fourth-quarter global comparable sales will be roughly the same as recent quarters. Restaurant margin percentages are expected to decline "at a level relatively similar to first quarter results," McDonald's says.

October global comparable sales are expected to be relatively flat.

"While we are focused on strengthening our near-term performance, the current environment continues to pressure results," said McDonald's President and CEO Don Thompson, in the press release. "Around the world, we remain confident in our ability to drive sustained, long-term profitable growth through our global growth priorities -- optimizing the menu, modernizing the customer experience and broadening accessibility. Moving forward, we are committed to enhancing shareholder value through disciplined investments that support our long-term growth opportunities and further differentiate Brand McDonald's."

-- Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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