McDonald's

(MCD) - Get Report

, the world's No. 1 restaurant chain, broke its six-quarter streak of missing earnings estimates Thursday, reporting a bottom-line increase on strong overseas sales. The company also widened its full-year 2002 earnings per share guidance, increasing the range by a penny.

For the second quarter ended June 30, the company reported net income of $498 million, or 39 cents a share, compared with $441 million, or 34 cents a share, in the year-earlier period. Analysts polled by First Call estimated earnings of 38 cents a share for the second quarter.

Total system sales increased 2% to $10.4 billion while total revenue increased 4% to $3.9 billion.

The biggest slice of growth came from Europe, where quarterly sales increased 7% and operating income was up 8%. European sales make up one-third of the company's total.

In the second quarter, U.S. sales were up only 1% and operating income was up 7% compared with the year-earlier period. Comparable restaurant sales in the U.S. decreased 1.6%.

Asked why the number of transactions in U.S. restaurants was down while the check amount was not decreasing, Chief Financial Officer Matthew Paull said customers have been "turning to other alternatives."

Paull said he hopes U.S. sales will be boosted by its New Taste menu, which offers more expensive items than the typical McDonald's fare, including the grilled chicken flatbread sandwich. He also cited improvements to the drive-through operations and other menu and service innovations.

Sales in Latin America declined 16.7%, which the company attributed to the area's economic woes.

Sales in Japan were hurt by its wobbly economy and consumer food safety concerns stemming from an outbreak of Mad Cow disease. In constant currency sales, the segment including Asia, the Middle East and Africa sank 6% for the quarter.

McDonald's widened its full 2002 EPS range to $1.47 to $1.53, excluding $142 million of charges in the first quarter. In June, the company estimated its full-year target at $1.47 to $1.52. Full-year estimates on First Call are $1.49.

Including the charges, McDonald's expects annual earnings to be $1.35 to $1.41 a share. That expectation reflects a foreign currency translation impact of neutral to up 3 cents for the year, the company said in a statement.

Also Wednesday, Salomon Smith Barney raised full 2002 earnings estimates for McDonald's to $1.50 a share from $1.48 a share, mostly on "improved currency outlook." Salomon retained its neutral stock rating on "disappointing" same-store sales in the second quarter.

McDonald's was recently unchanged at $23.84.