) third-quarter 2013 earnings of $1.52 per share beat the Zacks
Consensus Estimate of $1.50 by 1.3% and also grew 6% year over
year. Earnings in the quarter received a boost from the company's
higher top line and share repurchases.
Revenues surged 2.0% year over year to $7.32 billion during
the quarter, driven by increased franchise as well as
company-owned revenues. However, quarterly revenues missed the
Zacks Consensus Estimate of $7.34 billion by 0.3%.
Though McDonald's' global comparable sales (comps) were
positive for the third quarter, it was lower than the previous
quarter as well as the year-ago level. Global comps were up 0.9%
during the quarter versus 1.0% in the second quarter and 1.9% in
the year-ago period. The decline in comps was due to the lower
consumer spending resulting from the prevailing macroeconomic
Behind the Headlines Numbers
In the third quarter, revenues from company-operated
restaurants were up 2% year over year to $4.92 billion while the
same from franchise-operated restaurants increased 4% year over
year to $2.40 billion.
, comps increased 0.7%, backed by the company's menu innovation
as well as value offerings. The restaurateur's recently launched
chicken, beef and beverage offerings are expected to be its major
growth drivers in the region.
Operating income for the segment was up 5% year over year.
saw comps growth of 0.2%, backed by solid performance in the
U.K., France and Russia, offsetting the poor results in Germany.
McDonald's remains committed to product innovation, offering
value menu and execution of stronger marketing messages to
strengthen its position in the region.
Operating income was up 11% (8% in constant currencies) mainly
driven by strong performances in the U.K., France and Russia.
Asia/Pacific, Middle East and Africa (APMEA)
, comps slackened 1.4%. Operating income in APMEA was down 12%
(decreased 4% in constant currencies). Weak performance in
Australia, Japan and China were held responsible for such poor
In order to boost the segment's comps, the company is focusing
more on locally relevant items, expanding breakfast line-up as
well as daypart value options, better services, convenience
initiatives and restaurant developments.
During the quarter, the company paid $1.3 billion through
dividend and share repurchase.
For the fourth quarter, management expects global comps to
remain consistent with the recently reported quarter. However,
margin is expected to go down same as the first quarter. Global
comps are expected to remain flat in October.
Though, the company with its strong brand recognition
continues to focus on its innovative offerings and premium
products across all regions to boost its performance in the long
term, the company expects its business to be pressurized in the
near term due to prevailing macroeconomic concerns.
The fast-food chain is trying to perform better amid a
challenging macroeconomic environment. McDonald's has succeeded
in posting year-over-year rise in earnings and revenues in the
past two quarters, gained by value propositions and menu
innovation. Constant dividend hike irrespective of the economic
peaks and valleys also reflects for the company's inherent
However, the Zacks Rank #3 (Hold) company has become extremely
vulnerable to macroeconomic headwinds like debt concerns in
Europe, decelerating growth in Asia and intense competition in
the U.S. These factors justify our decision to remain on the
sidelines on the company at the current level till its efforts to
come out of the tough times yield results.
Some other players in the restaurant industry which look
attractive at the current level include
Red Robin Gourmet Burgers Inc.
AFC Enterprises Inc.
Bob Evans Farms, Inc.
). While Red Robin holds a Zacks Rank #1 (Strong Buy), AFC
Enterprises and Bob Evans Farms carry a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
BOB EVANS FARMS (BOBE): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
RED ROBIN GOURM (RRGB): Free Stock Analysis
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