McDonald's shares jump on strong 3Q numbers

CHICAGO -- McDonald's logged its 13th consecutive month of positive same-store sales and topped Wall Street profit and revenue expectations for the third quarter.

Shares in the world's biggest burger chain defied a sell-off in U.S. markets, jumping nearly 6 per cent to $176.59 in early afternoon trading.

The company earned $1.64 billion, or $2.10 per share. That's 12 cents better than industry analysts had projected, according to a survey by Zacks Investment Research.

Revenue of $5.37 billion, though down from the same period last year, also beat expectations. The company has been turning company-owned restaurants into franchises, which pulls on its revenue numbers. Ninety per cent of the company's 36,000 restaurants worldwide are now owned by franchisees.

Global same-store sales rose 4.2 per cent, led by double-digit growth in the Netherlands, Italy and Poland.

McDonald's CEO Steve Easterbrook said an increase in delivery orders is helping drive sales; as many as 10 per cent of orders in the United Kingdom and France are now being delivered through the company's partner, UberEats. McDonald's is now offering delivery at 15,000 restaurants, he said, and is exploring new ways to package food so it arrives hotter.

U.S. same-store sales grew 2.4 per cent. McDonald's lost share of U.S. breakfast sales, but hopes to turn that around in the fourth quarter with new menu items and local deals, Easterbrook said.

"It's very competitive out there at breakfast," Easterbrook said in a conference call with analysts and media.

Sales also were slowed by renovations, which caused full or partial closures at many stores. The company is adding ordering kiosks, improving drive-thrus and making other changes as part of a major effort to modernize and streamline service.

McDonald's says 15,000 stores globally will be converted to the new format by the end of this year, and the renovations should be a net positive to revenue by the end of 2019.

McDonald's also said its full-year tax rate will decline to 24 to 26 per cent from 25 to 27 per cent as a result of U.S. tax reform.

"Putting to one side the decline in revenue, which is a function of McDonald's transferring company-owned restaurants into franchises, this is a reasonable set of results for the burger giant," said Neil Saunders, the managing director of GlobalData Retail.

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Portions of this story were generated by Automated Insights using data from Zacks Investment Research.

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