I look at a lot of company earnings reports during a typical earnings season, so it takes more than just a decent report to really stand out in my mind. McDonald’s (MCD) recently delivered a true attention-getter, suggests Chuck Carlson, editor of DRIP Investor.
Indeed, the restaurant giant posted global comparable store sales of nearly 13% in the third quarter and a 10.2% increase on a 2-year basis. That kind of same-store growth is impressive for such a big company and points to the competitive advantages McDonald’s has versus its competitors.
While the stock moved to an all-time high on the solid earnings report, these shares have underperformed the S&P 500 over the last 12 months. Thus, I think the stock has room for more catch-up, and I look for the stock to put up nice results in 2022. Yielding 2.2%, McDonald’s offers a solid growth-and-income investment for any portfolio.
Broad-Based Momentum
McDonald’s is the largest restaurant business in the world, with some 40,000 restaurants in over 100 countries. McDonald’s was able to show nice growth across all segments:
* U.S. comparable sales increased 9.6% in the quarter (14.6% on a 2-year basis)
* International operated markets segment had comparable sales increase of 13.9% (8.9% on a 2-year basis)
* International developmental license markets segment increased nearly 17% (4.9% on a 2-year basis)
Another growth data point is the company’s increase in “digital” sales. McDonald’s defines digital sales as coming from such digital channels as mobile app, delivery, and kiosks at company-operated and franchised restaurants. Systemwide digital sales were about $13 billion, or over 20% of total systemwide sales in the firm’s top six markets.
The sales gains drove a nice boost to the bottom line. Per-share profits of $2.76 were up 24% year over year and handily beat the analysts’ consensus estimate of $2.46. Reflecting the strong operating results and the firm’s confidence in the future, McDonald’s recently boosted its dividend 7% to a quarterly rate of $1.38.
The dividend increase marks the 45th consecutive year that McDonald’s has boosted the dividend. In another indication of the company’s confidence in the future and its strong finances, the firm announced the resumption of its stock buyback program.
To be sure, McDonald’s has been seeing cost pressures, both on the commodity side and labor side. How- ever, the company’s increasing use of technology as well as its size and scale should help the firm defend and grow market share.
The recent stock action of McDonald’s is bullish, and I expect the latest price breakout to have some legs. McDonald’s is also the type of low-beta stock that should show good relative performance should a more risk-off market environment develop.
Please note McDonald’s offers a direct-purchase plan whereby any investor may buy the first share and every share directly.
