McDonald's profit climbs 27% on worldwide sales

ByABC News
October 19, 2007, 4:28 PM

CHICAGO -- The earnings, in line with preliminary results released last week, keep the world's largest restaurant chain on a sustained roll around the globe.

Net income for the July-through-September period was $1.07 billion, or 89 cents a share, up from $843.3 million, or 68 cents a share, in the third quarter 2006.

Excluding an after-tax gain of 6 cents a share from the sale of its Boston Market franchise, the company said its earnings were 83 cents a share.

That was in keeping with the revised expectations of analysts polled by Thomson Financial, who upgraded their estimates after McDonald's disclosed stronger-than-expected preliminary numbers Oct. 12.

Revenue was $5.9 billion, up 7% from $5.5 billion a year ago but slightly below the $6.04 billion expected by analysts. The weak dollar boosted revenue significantly; excluding currency translation, revenue was up just 3%.

The company cited "industrywide commodity and labor headwinds" as weighing on results a reference in part to soaring costs of commodities such as cheese. As a result, its U.S. operating margins declined 0.6% to 18.4% after also slipping in the first half.

But continuing momentum came from strong global same-store sales, those from restaurants open at least 13 months. Those sales rose 6.9% and increased for a seventh quarter.

"With the U.S. still delivering solid sales growth and Europe's turnaround story powering recent results, McDonalds is on a roll," Morgan Stanley analyst Mark Wiltamuth said in a research note.

The U.S. market, McDonald's biggest with nearly 14,000 restaurants, remained at the forefront of its surging sales, with an 18th consecutive quarter of higher same-store sales, up 5.1%.

The company credits breakfast items, chicken snack wraps and coffee for the latest U.S. gains. McDonald's coffee sales have risen 20% since it introduced a higher-priced premium roast coffee in March 2006.