McDonald's Posts Better Than Expected Earnings, McRib Boosts, Shares Edge Higher

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McDonald's (NYSE: MCD ) posted fourth quarter earnings Wednesday that beat analyst expectations and shares edged higher.

Further, same store sales for the company rose more than expected in in the quarter and in line with forecasts for the month of December. McDonald's unexpectedly reportedly weak comps in October which was followed by stronger than expected comps in November.

For the fourth quarter, McDonald's reported earnings per share $1.38, better than the forecast earnings per share of $1.33 by analysts. Also, revenue was strong at $6.95 billion. In the same period a year ago, McDonald's reported earnings per share of $1.33 and from the same period a year ago, revenue grew 1.9 percent.

Same store sales, where McDonald's saw weakness in October, finished the quarter with two strong months. After comps beat analyst estimates in October, comps were reported as in line with expectations in December, rising 0.1 percent for the month. For the whole quarter, comps rose 0.1 percent, better than the 0.3 percent drop expected. Analysts attribute recent strength in comps to the reintroduction of the McRib sandwich.

McDonald's saw margin expansion in the quarter, a positive sign for the company which has struggled with food inflation over recent years. Gross margins widened 50 basis points to 31.6 percent from 31.1 percent in the third quarter. Regionally, McDonald's beat estimates in North America and Europe but earnings lagged in the Asia/Pacific, Middle East and Africa region.

"Throughout 2012 we concentrated our efforts behind the global priorities that represent our greatest opportunities under the Plan to Win - optimizing our menu, modernizing the customer experience and broadening accessibility to our Brand," said McDonald's Chief Executive Officer Don Thompson. "McDonald's continued to grow by remaining focused on what matters most to our customers, although our results reflect the impact of the challenging global operating, economic and competitive environment. Our overall performance is a testament to the underlying strength of our business and our dedicated System of franchisees, suppliers and employees who continue to drive toward our mission to become our customers' favorite place and way to eat and drink."

Thompson continued, saying, "As we begin the new year, our average annual long-term targets in constant currency remain intact: Systemwide sales growth of 3% to 5%, operating income growth of 6% to 7%, and return on incremental invested capital in the high teens."

McDonald's shares edged higher in the pre-market following the earnings release. Shares rose 0.67 percent pre-market to $93.57.

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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