McDonald's expects profits to exceed projections
CHICAGO -- McDonald's hot streak keeps on going.
The world's largest fast-food chain said Friday its third-quarter profits will top Wall Street's estimates following another month of strong sales.
Global sales from its restaurants open more than a year rose 5.9 percent in September, led by an impressive 12 percent gain in its Asia/Pacific, Middle East and Africa division. Stronger foreign currencies helped boost results.
Same-store sales in its U.S. outlets rose 3.5 percent, increasing for a 54th consecutive month. The company cited its value menu, breakfast offerings and drinks as helping to boost sales -- some 60 percent of which now come from drive-throughs.
McDonald's said it expects to earn 83 cents per share in the quarter, not counting an after-tax gain of 6 cents per share from the sale of its Boston Market franchise. That is six cents per share better than the estimate of analysts surveyed by Thomson Financial.
The latest results continue a sizzling run for Oak Brook-based McDonald's that began in 2003 and continues for a variety of reasons including promotions, discount menus and popular new products.
The company's European restaurants performed well after lagging the U.S. comeback in recent years. Same-store sales rose 5.7 percent with France, the United Kingdom and Russia posting the strongest performances. Sales in Germany were down from the same month a year ago, when the company ran a coupon promotion.
McDonald's said total systemwide sales, including those from restaurants owned by franchisees and affiliates, rose 11.5 percent for the month and 11.8 percent for the quarter.
Premium coffee, introduced last year, has helped buoy the U.S. business -- its biggest -- along with ongoing benefits from later hours, cashless payments and new products like the chipotle chicken wrap.
The company also pleased investors last month by pledging to return as much as $17 billion in cash to shareholders through dividends and share buybacks by the end of 2009.
Analysts said the mix of strategies is clearly working, driving a continuing surge that has surprised Wall Street with its staying power.
"While there could be bumps in the road due to tough comparisons, the business remains strong," Andrew Barish of Banc of America Securities said in a note to investors.
Credit rating agencies, however, are wary of McDonald's adoption of a more aggressive financial strategy. Moody's Investors Service downgraded McDonald's on Sept. 27, noting higher debt levels will be required to support those initiatives.
The company reports full third-quarter results Oct. 19.
McDonald's shares rose 77 cents, or 1.37 percent, to close at $57.02 Friday after rising as high as $57.36, just shy of the all-time peak of $57.53 reached Wednesday.