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Results set McRecord
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April 17, 1998: 4:42 p.m. ET
Fast food leader reports strong quarter despite turmoil in Asian markets
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NEW YORK(CNNfn) - Fast food behemoth McDonald's Corp. posted record earnings of $362 million for the quarter ended March 31, up 5 percent from the year-ago quarter.
Diluted earnings per share rose 8 percent to 52 cents, in line with First Call estimates. Revenue reached $2.8 billion, a 7 percent increase over the $2.6 billion of 1997.
But McDonald's (MCD), based in Oak Brook, Ill., also recorded a 5 percent drop in operating income in the Asia/Pacific markets as a result of continued weakness in the region's economy. That drop, however, was more than offset by an 18 percent jump in Europe and a 29 percent increase in Latin America.
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"McDonald's global food service business continued to deliver record results despite the combined effects of the strong U.S. dollar, weak economies in several key markets outside the U.S., the economic downturns in Southeast Asia and a very competitive U.S. operating environment," Chairman and Chief Executive Michael R. Quinlan said.
"I am encouraged by the positive momentum in our global business and the direction we are taking," he added.
Analyst David Trossman of Bankers Trust New York said McDonald's performed "a little better than expected" in the U.S.and "a little worse than expected" in Europe.
The company's 12 percent profit growth in international markets was down slightly from its 14 percent to 15 percent growth rate in the previous four quarters.
"The international side was a little disappointing," he said.
Trossman expects McDonald's to earn $2.50 per share this year and $2.85 per share in 1999.
"I think the focus for them, in the U.S. in particular, is going to be less on unit growth and more on generating sales and return on what they've got," he said. "I wouldn't be surprised if growth slowed in Asia (more than it already has) this year."
McDonald's plans to add another 2,100 restaurants this year, approximately 85 percent outside the U.S.
The company's free cash flow will be used for share repurchases as it completes a $2 billion, three-year buyback program by year end.
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