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Why McDonald’s Has Investors “Lovin’ It”

February 18, 2010 – by Richard Band

Although I’m not your typical junk food junkie, I do admit to having a hearty appetite for big stock winners — and filling my plate up quite nicely of late is fast-food giant McDonald’s (MCD).

The largest restaurant chain on the globe, McDonald’s is a true international success story. I say international success story, because as of last year McDonald’s collected 65% of its sales (and over 50% of its consolidated operating profits) outside the United States. Yes, Mickey D’s may be the quintessential American fast-food joint, but apparently the rest of the world has a taste for USA-style convenience. 

Part of the reason why McDonald’s has such strong appeal overseas is because the company understands that its continued success depends on adaptation to local tastes. The company isn’t averse to changing menu offerings to cater to provincial tastes, and as such McDonald’s has managed to populate the globe with its Golden Arches.

According to the latest results, Mickey D’s continues cooking up big international numbers. The company beat January same-store sales expectations with a 2.6% increase in restaurants open at least 13 months. Interestingly, these better-than-expected aggregate same-store sales numbers overseas more than compensated for sluggish sales in U.S. restaurants. Mickey D’s same-store sales in the Asia/Pacific, Middle East and Africa regions were up on average 4.3%, while the average sales in U.S. restaurants fell 0.37%.

These results tell me two important things. First, they tell me that restaurant spending here in the U.S. is sluggish when compared to the rest of the world. They also tell me that McDonald’s has adapted to this situation, and it continues building on its foreign sales. 

Over the past six-plus years, the company has managed to post record profits, and based on their continued international strength, I suspect McDonald’s will do so once again in 2010. 

So, if you want to treat yourself to a great-tasting, money-making company with great earnings prospects, point your portfolio toward the Golden Arches.

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