) posted mixed fourth quarter 2013 results. Earnings of $1.40 per
share beat the Zacks Consensus Estimate of $1.39 per share and
were up 1.4% year over year. The upside was driven by an increase
in top line, which was partially offset by a rise in expenses and
a decline in comparable sales (comps).
Revenues grew 2.0% year over year to $7.0 billion during the
quarter. However, revenues failed to meet the Zacks Consensus
Estimate of $7.1 billion owing to sluggish comps. Comps decreased
0.1% in contrast to expectations of an increase of 0.9% as fewer
customers ate at its restaurants.
Behind the Headlines Numbers
In the fourth quarter, revenues from company-operated restaurants
increased 1.8% to $4.8 billion, while the same from
franchise-operated restaurants were up 2.4% to $2.3 billion.
In the United States, comps declined 1.4% compared to an increase
of 0.7% during the third quarter of the year. The decline could
be attributed to the strike by fast food workers in the U.S.,
stiff competition, relatively flat industry traffic trends and
inclement weather in December. Operating income in the U.S. was
up 1.0% year over year.
Despite the challenging macroeconomic conditions, comps in Europe
nudged up 1.0%, better than a 0.2% increase in the prior quarter,
driven by strong performance in the U.K., Russia and France,
which was partially offset by weak performance in Germany.
Operating income increased 3.0% (remained flat in constant
currencies) in Europe. Overall, results in Europe were supported
by the company's attempts to fulfill demand via innovative value
platforms and popular seasonal food events.
Asia/Pacific, Middle East and Africa (APMEA) continued to
underperform as comps declined 2.4% compared to a decline of 1.4%
during the third quarter. The results reflect weakness in Japan
and relatively flat performance in China and Australia.
Operating income in APMEA declined 8.0% (up 1.0% in constant
Full Year 2013 Highlights
For full year 2013, McDonald's reported earnings per share of
$5.55, up 3.5% year over year and revenues of $28.1 billion, up
2.0% year over year. Comps inched up 0.2% driven by higher
For the first month of the first quarter of 2014, the company
expects comps to remain relatively flat.
Though the company with its strong brand recognition continues to
focus on innovative offerings and premium products across all
regions to boost its performance in the long term, prevailing
macroeconomic concerns are likely to pressurize its business in
the near term.
The company expects capital expenditures in the range of $2.9 -
$3.0 billion. It intends to open 1,500 - 1,600 new restaurants
and reimage more than 1,000 existing locations.
McDonalds reported better-than-expected earnings, while revenues
missed the consensus mark. Though this fast-food chain company is
trying to gain by offering value propositions and menu
innovation, it has become extremely vulnerable to macroeconomic
headwinds like debt concerns in Europe, decelerating growth in
Asia and intense competition in the U.S.
McDonald's presently has a Zacks Rank #4 (Sell). Some
better-ranked stocks in the industry include
Fiesta Restaurant Group, Inc.
Jack in the Box Inc.
Buffalo Wild Wings Inc.
). While Fiesta Restaurant carries a Zacks Rank #1 (Strong Buy),
Jack in the Box and Buffalo Wild Wings carry a Zacks Rank #2
BUFFALO WLD WNG (BWLD): Free Stock Analysis
FIESTA RESTRNT (FRGI): Free Stock Analysis
JACK IN THE BOX (JACK): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
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