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(McDonald's earnings preview updated with news of expansion into South Korea.)



) --


(MCD) - Get McDonald's Corporation (MCD) Report

is due to report its fourth quarter earnings ahead of the opening bell on Monday.

Analysts' consensus call is for McDonald's to book fourth-quarter profits of $1.23 billion, or $1.16 per share, on revenue of $6.22 billion.

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As of Wednesday's closing price, McDonald's shares were around 2.4% lower year-to-date after rising 22.9% in 2010.

JPMorgan analyst John Ivanhoe noted that McDonald's share price weakness, after reaching an all-time high above $80 per share on Dec. 7, creates a favorable risk/reward opportunity for investors.

He attributed the recent pullback to "a combination of profit taking from strong performance (perhaps precipitating several well publicized block trades) as well as near-term fundamental concerns, including weather-affected winter comps in US/Europe, a weaker Euro, and higher commodities."

Ivanhoe suggested investors take advantage of a dip in MCD's share price, saying that "McDonald's still presents amongst the lowest risk/volatility business models in the group, but now with a significantly improved return potential." The analyst forecast that "continued employment gains and MCD-specific investment will drive earnings growth and predictable FCF generation in our view, fairly immune from comp or commodity driven cost volatility."

Ivanhoe maintained an overweight rating and $84 price target on McDonald's shares.

RBC Capital Markets analyst Larry Miller noted Tuesday that he expects McDonald's to book comparable same-store-sales growth, or sales at stores open at least one year -- a key metric in the restaurant industry -- in the low- to mid-single-digit percentage range in 2011.

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upgraded shares of McDonald's to outperform, from sector perform, but maintained his price target of $85.

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, McDonald's has been looking overseas for growth.

McDonald's said in December it plans to grow its presence in China by 40% next year, opening 200 new stores in the country over the next three years.

The Golden Arches said its investment will include opening new restaurants and updating existing stores. Among the new store openings, about half will be drive-through locations, McDonald's said. McDonald's currently operates more than 1,200 restaurants in China.

McDonald's Asia President Tim Fenton alluded in November to the company's plans to have more than 2,000 restaurants in China within the next four years.

At the time

McDonald's had just announced price increases at its China locations, charging Middle Kingdom customers higher prices for its burgers, drinks and other menu items in an effort to offset higher costs.

McDonald's also plans to double its presence in South Korea within the next five years.

McDonald's Korea CEO Sean Newton said the goal of the $449 million investment will be to open 243 new McDonald's restaurants in South Korea by 2015, the majority of which will be franchised, and 80% of which will feature drive-thru windows. The announcement came during a press conference in central Seoul, as reported by

Korea Joongang Daily


That would bring McDonald's total presence in South Korea to around 500 restaurants.

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"Many global companies have focused on other emerging markets, but Korea is one of the five top priority markets for McDonald's," Newton said. "Korea is economically advanced, yet penetration

of quick-service restaurants is less than one-third of the rate in countries such as France or England."

In its third quarter, reported on Oct. 21, 2010,

McDonald's beat top- and bottom-line expectations, crediting its nationwide promotion of McCafe Frappes and Smoothies, plus the everyday affordability of its Dollar Menu. Comps 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 systemwide comps grew 4.8% in November, its most recently reported month, but the figure came up shy of expectations.

At the time, Janney Capital Markets analyst Mark Kalinowski cautioned investors to continue to keep a close eye on food costs, which continued to rise in recent months. He pointed out that third-quarter gross margins were better-than-expected, indicating the company was addressing any qualms shareholders may have had with its fundamentals. Kalinowski 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 bear the brunt of higher food costs, not the franchisor, he said.

RBC's Miller expects McDonald's to raise prices in the 2% to 3% range in 2011 as it works to offset higher food costs, similar to price hikes it implemented in China last year.

McDonald's chief financial officer Pete Bensen said in October that beef and other ingredient costs were indeed rising, but told analysts the company could handle the increases well, passing some of those higher costs on to consumers this year.

Higher-priced menu items could boost same-store sales for McDonald's this year.

RBC's Miller said an improving labor market, strengthening global economy and new menu offerings such as oatmeal could help lift McDonald's store traffic this year.

For the current quarter, McDonald's first fiscal quarter of 2011, Wall Street is looking for earnings of $1.16 billion, or $1.10 per share, on revenue of $5.87 billion.

For fiscal 2011, analysts expect McDonald's to earn $5.29 billion, or $5.02 per share, on revenue of $25.25 billion.

-- Written by Miriam Marcus Reimer in New York.

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