Golden Arches Keep Their Luster

01/22/2010 3:07 pm EST


Jim Jubak

Founder and Editor,

Ronald McDonald delivered a big surprise this morning.

McDonald’s (NYSE: MCD) announced fourth quarter earnings of $1.11 a share before the market opened on January 22. That was nine cents a share better than Wall Street had expected. In the fourth quarter of 2008, the company earned 87 cents a share. Revenue climbed 7.3% from the fourth quarter of 2008 to $5.97 billion. That, too, was above the Wall Street consensus (at $5.94 billion).

But the biggest surprise came on global comparable-store sales. There the company reported an increase of 2.3%. Wall Street had been expecting comp-store sales to fall by 0.03%. Comp-store sales growth was, however, lower than last quarter’s 3.8% increase.

Europe was the star, Asia was a disappointment, and the United States was the big surprise when it came to regional comp-store sales.

Longer hours and refreshed restaurants in Europe added up to a 4.8% climb in comp-store sales for the quarter. Analysts had projected 4.3% growth.

In Asia, the Middle East, and Africa, comp-store sales increased 1.5%, but that was well below the 2.4% growth projected by Wall Street. McDonald’s is still struggling in China, where, despite the economic recovery represented by 10.7% GDP growth in the fourth quarter, many Chinese are still worried about their personal economy and are opting to save money by eating at cheaper local alternatives to McDonald’s.

In the United States, the toughest market for any restaurant company over the last year, McDonald’s addition of free Internet access and its $1 breakfast menu managed to earn the company a 0.1% increase in comp-store sales for the quarter. Analysts had expected they would fall by 0.6%.

As of January 22, 2010, I’m leaving my target price at $72 a share by September 2010. On January 22, the stock was trading near $64 and paying a 3.4% dividend yield. (For why you want global brands in your portfolio, see this recent post.)

Full disclosure: I don’t own shares of any stock mentioned in this post in my personal portfolio.

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