McDonald's Jumps as International Growth Offsets a Soft U.S. Quarter

McDonald’s shares rose about 6% in afternoon trading Wednesday, to near $279, after the burger chain reported third-quarter profit growth led by its international markets. The company earned more and sold more worldwide, even as sales at its U.S. restaurants slipped. The report landed before the opening bell.

International markets carried the quarter

Global comparable sales, the industry’s gauge of sales at restaurants open at least a year, rose 1.5% in the quarter that ended September 30. The growth came from abroad. Comparable sales in McDonald’s international operated markets rose 1.4%, with Germany and Australia leading and France weighing on the group. The developmental licensed markets, a set of mostly franchised regions across Asia and Latin America, gained 4.2%, led by Japan and held back by falling sales in China.

Adjusted earnings came to $3.57 a share, up 11% from $3.22 a year earlier and ahead of the roughly $3.41 analysts had projected. On a reported basis the company earned $3.51, up from $3.18. Total revenue edged up 1% to $7.16 billion, net income rose 9% to $2.49 billion, and systemwide sales across the whole chain grew 4% to more than $38 billion. Sales to loyalty-program members topped $11 billion for the quarter across 70 markets. “McDonald’s delivered another quarter of global growth, with solid performance across much of our international business,” chief executive Chris Kempczinski said in the release.

The U.S. business stabilized late in the quarter

At home the picture was softer. U.S. comparable sales fell 0.2% as fewer customers came through the door, an effect the company said was mostly offset by higher spending per order. Kempczinski said McDonald’s was “encouraged by improvement as the quarter progressed following our intervention on value,” a reference to the lower-priced menu the chain has leaned on to win back cost-conscious diners. The United States is McDonald’s single largest market, so a flat-to-negative reading there draws the most scrutiny even in a quarter the rest of the world carried.

The company also raised its quarterly dividend 4%, to $1.93 a share. That extends a run of annual increases now reaching 50 years.

The stock came in well off its autumn lows

McDonald’s entered Wednesday at $263.04, having climbed about 13% over the prior month from $232 in early October. Wednesday’s move carried it to about $279, within reach of its three-month high of $282 and still some 18% below the 52-week high of $341.75 set earlier in the year. Trading volume ran at 1.3 times the 20-day average by early afternoon. The broader market was sharply higher on the day, so part of the gain rode a rising tape. Even so, McDonald’s outpaced it.

What to watch

The U.S. comparable-sales line is the number to follow from here. Management tied the late-quarter improvement to its value menu, and whether that holds into the fourth quarter will show in the next report, due in late January. The value push is the swing factor. Abroad, Germany, Australia and Japan were the quarter’s engines, while France and China lagged, and the gap between the strongest and weakest markets is worth tracking as the chain leans harder on growth overseas. The fourth quarter closes the fiscal year in December.

This is a general-market summary for information only — not investment advice, and not a recommendation regarding any security.