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Foreign currency has benefited MCD's consolidated and European operating income growth in the last 7 quarters (beginning in 3Q06). Its currency-neutral growth is still impressive, but investors may have become accustomed to this F/X cushion. Europe's contribution to MCD's consolidated operating income grew from 36% in 2006 to nearly 39% in 2007 (partly due to the strength of the Euro and British Pound). This has made Europe an increasingly important component of the company's overall operating income relative to the U.S.'s 51% contribution and is one of the factors which helped to drive momentum behind MCD's stock as investors bought into the it's global this time theme.

MCD Europe's accelerated F/X benefit started to hit the operating income line at a very welcomed time for the company as it helped to offset the restaurant margin declines in the U.S in each of the last 5 quarters. The spread between the company's reported operating income growth and currency-neutral growth widened dramatically in 4Q07 and 1Q08 as the Euro has strengthened further relative to the U.S. dollar. So the F/X comparisons will become more difficult going forward! And if the Fed raises rates anytime soon, the U.S. dollar should follow.

MCD does not provide specific EPS guidance but it does highlight some major earnings components. The company's 1Q08 earnings release stated:

A significant part of the Company's operating income is generated outside the U.S., and about 55% of its total debt is denominated in foreign currencies. Accordingly, earnings are affected by changes in foreign currency exchange rates, particularly the Euro and the British Pound. If the Euro and the British Pound both move 10% in the same direction compared with 2007, the Company's annual net income per share would change by about 8 cents to 9 cents.

Recently, these currency moves have worked to MCD's favor, but as outlined by the company, a move in the opposite direction will impact earnings in a meaningful way.