McDonald’s Corp. (NYSE: MCD) – Q1 FY 2011 Earnings Preview
Wednesday, April 20, 2011 2:43 PM

The world's largest fast-food restaurant chain, McDonald's Corp. (NYSE: MCD) is expected to report its first quarter FY 2011 earnings results on April 21, 2011. For the last four quarters ended December 2010, the company's reported earnings exceeded analysts' consensus estimates in the first three quarters by margins of 7.30 percent, 0.90 percent and 3.20 percent. For the fourth quarter, the reported EPS met analysts' consensus estimate of $1.16 per share.

For the first quarter ending March 31, 2011, analysts' estimates of earnings range from the low of $1.05 per share to the high of $1.17 per share, compared with the consensus estimate of $1.14 per share to $1.03 per share in the year ago quarter. Analysts' revenue estimates for the first quarter range from a low of $5.82 billion to a high of $6.09 billion, compared with a consensus estimate of $5.99 billion to $5.61 billion in the same quarter a year ago. For the quarter ended March 31, 2011, the consensus EPS forecast has increased from $1.09 per share estimated 60 days ago to $1.16 per share on April 7, 2011.

In the last 52 weeks, MCD is trading in the range of $65.31 to $80.94. The last trading price of the stock was $76.72, gaining 0.16 percent on April 6, 2011. During the first quarter, analysts at RBC Capital Markets upgraded the stock rating to outperform from sector perform.

As of December 2010, the company operated 32,737 restaurants in 117 countries, of which 26,338 were operated by franchisees and 6,399 were operated by the company. The company experienced a dramatic turnaround in 2003, driven by a two-pronged strategy. In the U.S., McDonald's focused on increasing sales at existing locations by renovating stores, expanding menu options and extending store hours. Internationally, McDonald's expanded aggressively, opting to franchise rather than operate its new locations, providing new income with little overhead.

For the last quarter, McDonald's reported total revenue of $6.2 billion, up 4 percent compared with revenue of $5.9 billion in the same period last year. Operating income for the quarter grew by 2 percent to $1.85 billion and net income for the quarter was $1.24 billion, or $1.16 per share. Those results compare with net income of $1.21 billion, or $1.11 per share, in the fourth quarter FY 2009. For full year 2010, the company reported total revenue of $24 billion, up 6 percent compared with total revenue of $22.74 billion. Operating income was $7.4 billion, an increase of 9 percent compared with $6.8 billion in the previous year. Net income for the year was $4.9 billion, or $4.58 per share compared with $4.5 billion, or $4.11 per share, in the previous year.

During the first quarter FY 2011, McDonald's board of directors declared a quarterly cash dividend of $0.61 per share of common stock paid on March 15, 2011 to shareholders of record at the close of business on March 1, 2011.

On September 24, 2009, the board of directors approved a share repurchase program that authorizes the purchase of up to $10 billion of the Company's outstanding common stock with no specified expiration date. During 2010, the company returned $5.1 billion to shareholders consisting of $2.4 billion in dividends and nearly $2.7 billion in share repurchases.

In the restaurant industry, McDonald's competes with Yum! Brands Inc. (NYSE: YUM). For the trailing 12 months, YUM! Brands reported earnings of $2.38 per share on revenue of $11.34 billion, with quarterly revenue growth of 5.90 percent. On the other hand, McDonald's reported earnings of $4.58 per share on revenue of $24.07 billion, with quarterly revenue growth of 4 percent.

McDonald's has a market capitalization of $79.7 billion. It has a P/E ratio of 16.68, lower compared with the industry's P/E of 18.70. The P/B ratio of the company is at 5.50, lower against the industry's P/B of 8.25. The company's net profit margin is 19.99 percent, better than the industry's margin of 10 percent. The ROE of the company is at 34.51 percent, compared with the industry's ROE of 28.50 percent.



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