(Updated with additional commentary and information.)



) --


(MCD) - Get Report

shares gained in morning trading Thursday after the world's largest restaurant chain posted better-than-expected third quarter profits and sales.

McDonald's said early Thursday it grew profits by 10.3% in the recent quarter to $1.39 billion, or $1.29 per share, up from $1.26 billion, or $1.15 per share, in the year-earlier quarter. Results easily beat expectations for earnings of $1.34 billion, or $1.25 per share.

The Golden Arches said its nationwide promotion of McCafe Frappes and Smoothies, plus the everyday affordability of its Dollar Menu, helped boost sales in the quarter.

>> Restaurant Stocks: Earnings to Watch

Comparable same-store-sales, or sales at stores open at least one year -- a key metric in the restaurant industry -- grew 6% globally, including growth of 5.3% in the U.S., 4.1% in Europe and 8.1% in Asia/Pacific, Middle East and Africa.

McDonald's shares jumped 2.4% in morning trading Thursday. Janney Montgomery Scott analyst Mark Kalinowski said he expects

McDonald's stock to push up to all-time highs during the day's session following the company's stellar earnings report.

>> 5 Restaurant Stocks to Buy Now

"McDonald's is blowing away the competition in all three major geographies," he said in an appearance on CNBC.

The analyst cautioned that investors should keep a close eye on food costs, which are generally going up, but pointed out that McDonald's gross margins where better-than-expected in the recent quarter, indicating the company is addressing any qualms shareholders may have with its fundamentals.

Kalinowski also 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 bare the brunt of higher food costs, not the franchisor, he said.

Deutsche Bank analyst Jason West noted before McDonald's reported that he expected Europe "to settle into a range of +3-4%

comps growth in coming months as menu pricing, remodels, breakfast/drive-thru expansion, and McDonald's dominant competitive positioning drive healthy comps, despite some macro headwinds."

Kalinowski told


that "franchisees tell us smoothies, the Dollar Menu and the successful Monopoly promotion all helped to drive

McDonald's top line."

Industry rival

Yum! Brands

(YUM) - Get Report

kicked off the earnings season earlier this month when the operator of KFC, Pizza Hut and Taco Bell posted solid third-quarter results and a healthy outlook earlier this month.

Earnings came in 6.9% higher at $357 million, or 74 cents per share, on a 2.9% jump in revenue to $2.86 billion.

Yum!'s same-store sales grew 6% in China and 1% in the U.S. and its international division. In the U.S., comps grew 8% at Pizza Hut and 3% at Taco Bell. Comps at KFC fell 8%.

Analysts from Barclays Capital reiterated a rating of equal weight on Yum! shares with a price target of $48 following its earnings release, while RBC Capital Markets reiterated a rating of outperform with a price target of $55. Stifel Nicolaus analyst Steve West had a hold rating and $48.62 price target on the stock.

DB's West maintained a hold rating on the stock and $46.98 price target but noted that Yum!'s "strong international margin trends and a large cash balance provide good visibility on our new forecasts, with higher likelihood of upside than downside."

Domino's Pizza

(DPZ) - Get Report

also beat top- and bottom-line expectations for the third quarter, though net earnings actually declined year-over-year. A 14.8% jump in revenue was attributed to higher volumes and commodity prices in supply chain, higher same store sales in both domestic and international stores and store count growth in international markets.

Domino's grew comps by a strong 11.7% year-over-year thanks to continued positive consumer response to the company's new pizza recipe, launched last December.

>> Domino's Pizza Heats Up on Earnings Beat

Drive-in burger chain



posted a sharp decline in quarterly financials, booking weaker-than-expected earnings of $4.7 million, or 8 cents per share, on sales of $155.1 million.

Sonic said impairment charges of $15 million in the quarter weighed on profits. Excluding one-time items, net earnings per shares would have been 23 cents, in line with analysts' consensus call.

Sonic's comps fell 6.4% in the recent quarter, with same-store sales declining 6.4% at franchise drive-ins and 6.1% at company-owned drive-ins.

Despite the earnings decline, analysts from RBC Capital Markets issued an upgrade on Sonic shares to outperform from sector perform, and raised their price target to $12 from $10.

Stifel's West had a sell rating on Sonic shares and $9.67 price target. "Due to the continued deleverage from significantly declining comp sales, higher labor, other operating costs and rising food costs primarily due to higher ground beef prices and no contracts will lead to extreme margin erosion in our view," he noted.



(WEN) - Get Report


Jack in the Box

(JACK) - Get Report


Sonic has been tapped as a potential private-equity takeover target

>> Wendy's Spikes on Takeover Talk

"The right private owner might help one or more of these chains eventually become better, and likely smaller, competitors" to McDonald's, UBS wrote in a note to investors last month.

-- Written by Miriam Marcus Reimer in New York.

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