McDonald’s profit tops forecasts in Q3

McDonald’s (NYSE:MCD) US same-store sales rose for the first time in two years, and global comps grew 4% in the third quarter, outpacing Chipotle Mexican Grill’s (NYSE:CMG) 2.6% gain.

Wall Street expected McDonald’s to deliver $1.27 in earnings per share on $6.41 billion in revenue, according to a consensus estimate from Thomson Reuters.

However, David Palmer, RBC Capital Markets restaurant analyst, said in a note that the addition of all-day breakfast is likely to continue drive results in the fourth-quarter, helping to accelerate the faster-than-expected turnaround at the fast-food chain. Comparable sales for its biggest global markets increased 4.6% for the third quarter, with strong performances in Australia, Britain and Canada.

After the report, McDonald’s stock increased around 7% in the early hours of trading, improving the Dow by 47 points.

McDonald’s is trying to spark a turnaround under CEO Steve Easterbrook, who took over in March. Over the summer, McDonald’s offered a Double Cheeseburger and small fries for $2.50, a deal that executives said performed better as the season went on. Even though they were lapping a relatively easy quarter for establishing positive comparable sales, it was still great to see such a strong performance.

Efficient operations smoothed out the effect of lower salesEarnings certainly pleased investors, as net income rose 23% to $1.3 billion, which translated into diluted earnings per share of $1.40, an expansion of 28% over the prior period.

The company recently began offering customers a few items on its breakfast menu all day long. That period did not include the nationwide all-day breakfast debut, a much-touted initiative for the chain’s turnaround efforts. However, when compared to a similar situation – Taco Bell’s breakfast launch – history shows that the novelty will wear off and sales will again decline unless, as Glueck says, “McDonald’s can somehow build something new into their campaign”. McDonald’s said its emphasis on value and breakfast contributed to its recovery in China. Easterbrook said that he wanted to transform McDonald’s into a “modern, progressive, burger company”, according to the Associated Press.

Earlier this month several McDonald’s franchisees said they had negative view of the company’s future, with one owner suggesting the restaurant chain was in its “final days” and that the brand as a whole was in a “deep depression”.