) posted fourth quarter 2011 earnings of $1.33 per share,
surpassing the Zacks Consensus Estimate of $1.30. Fourth quarter
earnings were 15% higher than the year-ago level of $1.16. The
currency movements did not impact the quarterly results.
Value offerings and premium products coupled with higher
comparable sales were primarily responsible for the earnings
growth. The company also derived significant synergies from the
"Plan to Win" program, which is aimed toward sustaining growth by
driving restaurant visits, providing everyday value, innovating new
menu items, and re-imaging restaurant and marketing
The company's full-year earnings per share were $5.27 versus
$4.58 in fiscal 2010. The currency favorably impacted the fiscal
earnings by 19 cents per share.
The world's largest hamburger chain said that revenues for the
quarter climbed 10% to $6.82 billion, in line with the Zacks
Revenues from company-operated restaurants rose 10% to $4.6
billion while revenues from franchise-operated restaurants jumped
9% to $2.2 billion. Total operating income grew 14% to $2.1
McDonald's global comparable sales maintained its growth
momentum with healthy margins on an expanding market share. Global
comparable store sales rose 7.5% during the quarter with the U.S.
comp up 7.1%, Europe up 7.3% and Asia/Pacific, Middle East and
Africa (APMEA) up 6.9%.
Product innovation, along with value menu offerings like Chicken
McNuggets, breakfast menu, McCafe beverage line up as well as
everyday value options bolstered U.S. comps and led to a 15% growth
in operating income. Additionally to drive traffic, McDonald's
continues to revamp its core offerings with variations on favorites
like Chicken McNuggets and burgers and restaurant
In Europe, operating income grew 10% (12% in constant currency),
despite the ongoing negative macro headlines in the region. The
growth was backed by stronger performance in the U.K., France,
Russia and Germany. Locally relevant menu choices, promotional food
events, sustained focus on multiple-tier menu offerings and a
restaurant reimaging program continued to drive market share
In APMEA, operating income jumped 22% (19% in constant
currency), driven by strong performance in many markets and
continued focus on daypart value options, variety in menu as well
as locally relevant items.
Company-operated expense and franchised restaurant occupancy
expenses saw a spike of 10% and 5%, respectively, but selling,
general and administrative expenses fell 1% from the prior-year
Fiscal Year Performance
McDonald's revenues for 2011 surged 12% year over year to $27.0
billion. Revenues from company-operated restaurants rose 13% to
$18.3 billion while the same from franchise-operated restaurants
jumped 11% to $8.7 billion. Total operating income grew 14% to $8.5
McDonald's global comparable sales increased 5.6% during fiscal
2011 with positive comparable sales across all geographical
In 2011, McDonald's returned $6.0 billion to its shareholders
through share repurchases and dividend payments.
The company anticipates capital expenditure of approximately
$2.9 billion for 2012. Nearly half the amount will be reinvested in
existing restaurants and the remainder will primarily be used to
open about new 1,300 restaurants.
The company expects the positive trend to continue in 2012 and
January global comparable sales to consequently increase in the
range of 5.5% to 6.5%.
The Oak Brook, Illinois-based company continues to drive
same-store sales while maintaining healthy margins. We believe that
revenues will grow through unit expansion and strong comps momentum
over the next few quarters.
Based on a strong balance sheet and consistent earnings, the
stock provides relative safety and moderate growth prospects due to
its exposure to the fast-growing international markets. Moreover,
the franchising strategy that is predominant in McDonald's business
model helps drive steady cash flow streams, solid margins and
However, stiff competition from other quick-service restaurant
operators, commodity pressure and macroeconomic factors influencing
consumer spending patterns still remain areas of concern.
Consequently, the company has a Zacks #2 Rank (short-term Buy
rating). We also reiterate our long-term Neutral
One of McDonald's primary competitors,
Yum! Brands Inc.
), will announce its fourth quarter 2011 results on February 1,
after the market closes.
MCDONALDS CORP (
): Free Stock Analysis Report
YUM! BRANDS INC (
): Free Stock Analysis Report
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