MCD – A SEPTEMBER SURPRISE

As I said going into the quarter, I think MCD’s reported September results will be the primary driver of the stock’s performance today.  I was wrong on the direction though.  September comparable sales growth came in better than the street’s expectations across the board and MCD reported 3Q09 EPS of $1.15 relative to the street’s $1.11 estimate so the stock is moving higher. 

 

Relative to my own expectations, the U.S. came in surprisingly strong, up 3.2%.  On a 2-year basis, this implies trends that are about even with what we saw in June and August.  Investors were not happy with what they saw in June and August (MCD traded down in reaction to both sales releases), but people were expecting continued deceleration in September and that did not happen.

 

In Europe, MCD reported 6.9% same-store sales growth in September, which came in better than the street’s expectation but light relative to my expectations.  Based on the ranges I laid out in my September sales preview, I view this 6.9% number as BAD because it points to a 160 bp sequential slowdown on a 2-year average basis.

 

APMEA’s reported 5.3% same-store sales growth beat both consensus and my expectations by the biggest magnitude and relative to my ranges, is a GOOD number because it signals an acceleration in 2-year average trends.  On a 2-year basis, this September result does not point to a return to the 7%-plus 2-year trends we saw earlier in the year, but it does show sequential improvement.

 

MCD – A SEPTEMBER SURPRISE - mcdsss


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