McDonald's Shares Surge on 3Q Outperformance

EarningsDow Jones Newswires

McDonald's Corp. (NYSE:MCD) on Thursday reported its first quarterly increase in U.S. same-restaurant sales in two years, an early sign that the burger giant's turnaround efforts are taking hold.

Continue Reading Below

Shares jumped 6.7% to $109.43 a share in premarket trading, which would be an all-time high if they open at that level, as McDonald's third-quarter profit and revenue topped Wall Street expectations. The stock has climbed 5.5% in the past month through Wednesday's close and has pushed to highs recently.

McDonald's is working to turn around its U.S. business after a long stretch of sales declines. The company has made a number of moves, including offering all-day breakfast, paring down the menu, and allowing regional markets to develop their own products and placing greater emphasis on the quality and freshness of ingredients.

In the U.S. market, McDonald's same-restaurant sales grew 0.9% in the latest quarter, beating the 0.2% decline analysts had expected, according to Consensus Metrix.

McDonald's cited the introduction of a new deluxe crispy chicken sandwich and all-day breakfast for the surprise growth.

Growth in the sales metric was even stronger abroad in the quarter.

In established international markets, same-store sales grew 4.6%, topping the 3.4% growth analysts had expected, amid strong performances in Australia, the U.K. and Canada.

In its high-growth markets segment, which includes countries like Poland and Spain with big expansion potential, same-store sales surged 8.9% amid strength in China. Analysts had expected 4.7% growth.

McDonald's performance in China has been recovering after an issue with a supplier last year dented sales.

Globally, same-store sales grew 4%, easily topping the 1.9% increase analysts had forecast, according to Consensus Metrix.

Chief Executive Steve Easterbrook said in a news release that he expects the momentum to continue, with same-store sales expected to be up in all regions in the current quarter.

In all, McDonald's reported a profit of $1.31 billion, or $1.40 a share, up from $1.07 billion, or $1.09 a share a year aerlier.

Revenue fell 5.3% to $6.62 billion, but would have grown 7% excluding currency impacts.

Analysts polled by Thomson Reuters had forecast $1.27 a share in earnings on $6.41 billion in revenue.

McDonald's said its operating profit fell 2% in the quarter, weighed down in part by investments in employee wages and benefits.

What do you think?

Click the button below to comment on this article.