12% 2Q Income Rise at McDonald's

July 23/Chicago/Associated Press Financial Wire -- Net income climbed 12% at McDonald's Corp. in the second quarter as customers around the globe gobbled up its cheap food and U.S. diners responded to its profitable frappes and other drinks on its hit McCafe menu.

The world's largest hamburger chain also got a boost from business in customers in China and Australia.

R.W. Baird analyst David Tarantino wrote in a research note that the results showed "healthy" revenue growth but said investors have hoped for even higher figures.

Citi analyst Greg Badishkanian called the company's performance "fairly benign" and might be a disappointment after the company's stock climbed more than 7% in the past two weeks as investors awaited the announcement.

Still, McDonald's has outpaced many of its competitors in recent years, particularly in the U.S. where its value menu helped insulate it from much of the economic weakness that has hurt competitors such as Burger King Corp. and Wendy's/Arby's Group Inc.

"These are strong results in today's environment where we still see nearly double-digit unemployment and low consumer confidence," chief operating officer Don Thompson told investors during a conference call with investors.

For the three months that ended June 30, McDonald's earned $1.23 billion, or $1.13 per share -- up from last year's net income of $1.09 billion, or $0.98 per share.

Revenue climbed 5% to $5.95 billion -- up from $5.65 billion last year.

Both figures topped Wall Street forecasts. Analysts surveyed by Thomson Reuters were expecting McDonald's Corp. to earn $1.12 per share on revenue of $5.91 billion.

Meanwhile, sales at locations open at least a year climbed 4.8% during the quarter. The measure an important figure that tracks restaurant performance climbed 3.7% in the U.S., while rising 5.2% in Europe and 4.6% elsewhere around the globe.

In the U.S., where McDonald's has almost 14,000 of its more than 32,000 restaurants, operating income climbed 7% to $895.1 million. Revenue in the U.S. rose 2% to $2.08 billion as more customers came into restaurants to buy breakfast meals or the company's popular drinks like smoothies and the icy coffee drinks called Frappes.

"This is a product that our customers truly love," Thomson said of the smoothies that proved so popular the company had to scrap free sampling of the the fruit-and-yogurt drinks to keep the drink in stock.

From the July 26, 2010, Prepared Foods' Daily News
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