Anyone worried that
McDonald's (NYSE: MCD) momentum was slowing
will find plenty of reassurance in today's quarterly
results.
The fast food chain's third-quarter net income rose by 6%,
to $1.26 billion, or $1.15 per share. Revenue decreased by 4%
(without currency effects, it would have risen by 2%) to
$6.05 billion. Global comps increased by 3.8% -- rising 2.5%
in the U.S., an impressive 5.8% in Europe, and 2.2% in the
Asia/Pacific, Middle East, and Africa segment. The company
credited its new Angus Third Pounders and McCafe espresso
drinks for drumming up success in America.
As if that's not appetizing enough, McDonald's also
boosted its quarterly cash dividend by 10% to $0.55 per share
(or $2.20 annually), which goes into effect in the fourth
quarter. McDonald's has been delivering both impressive
operational growth and a tasty payout.
Stocks like McDonald's make a great case for buy-and-hold
investing. The company has competed admirably against
fast-food rivals such as
Burger King (NYSE: BKC),
Yum! Brands (NYSE: YUM), and
Wendy's/Arby's (NYSE: WEN), proving that it's
a true leader in the fast-food space. And it's aggressively
pursuing innovation, most recently via its new premium coffee
offerings. In addition to luring new customers into Mickey
D's restaurants, the McCafe line is a direct challenge to
java purveyors such as
Starbucks (Nasdaq: SBUX).
McDonald's bargain-priced offerings give it an edge in
difficult times, not unlike the advantage enjoyed by discount
retail giant
Wal-Mart Stores (NYSE: WMT). Compare its
shares to pricey restaurant stocks such as
Cheesecake Factory (Nasdaq: CAKE), which
currently trades at 24 times trailing earnings. At about 15
times trailing earnings, McDonald's doesn't look unreasonably
priced relative to its rivals, and its leadership position in
fast food gives it an added edge over many others in the
sector.
Last quarter, many investors seemed to
choke on their Big Macs, but I still gave Mickey D's the
thumbs-up for the long term. The market's been doing some odd
things lately; many higher-risk stocks have rallied, becoming
overpriced. But McDonald's, a well-run and venerated
blue-chip that pays an increasing dividend, remains one of
the safer bets in a crazy market.
Bon appétit.
Get some related Foolishness to go:
poised for a falllast quarter.
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This article was originally published as
McDonald's Burns Naysayerson
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