The Economy

McDonald’s Q3 Profit Shows Turnaround Is Legit

U.S. sales grew for the first time since 2013, increasing 0.9%.
Katie Kuehner-HebertOctober 22, 2015
McDonald’s Q3 Profit Shows Turnaround Is Legit

Investors reacted favorably to McDonald’s third quarter earnings report that gave strong evidence that the fast-food chain’s turnaround was legit.

The Oak Brook, Ill. company on Thursday said that global sales at established restaurants rose a much better-than-expected 4% in the third quarter, ending six straight quarters of flat or falling results.

Net income rose 23%, to $1.31 billion, or $1.40 per share. Revenue fell 5%, to $6.62 billion. Analysts on average had expected a profit of $1.27 per share and revenue of $6.41 billion, according to Thomson Reuters I/B/E/S.

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Perhaps the biggest news, according to CNNMoney, was that McDonald’s

U.S. sales grew for the first time since 2013, increasing 0.9% in the third quarter buoyed by the introduction of the new “Premium Buttermilk Crispy Chicken Deluxe Sandwich” and the return to the classic recipe ingredients for the Egg McMuffin.

“I am encouraged by our operating performance for the quarter, with positive comparable sales across all segments, including the U.S., as well as sales recovery in China following the prior year supplier issue,” McDonald’s president and chief executive Steve Easterbrook said in a press release. “I am confident in the fundamental strength of the McDonald’s system and our ability to drive initiatives that are focused on delivering the greatest benefit for our customers.”

McDonald’s turnaround “just might be legit,” CNNMoney said. The fast-food chain is trying to reinvent itself after years of losing customers to trendy rivals like Chipotle and Shake Shack. In addition to all-day breakfast, Easterbrook has sought to improve food quality with a number of changes, including cutting back on chicken raised on antibiotics and promising cage-free birds within a decade.

Morningstar analyst R.J. Hottovy said he was most impressed by the return to U.S. growth – something he thought wouldn’t happen until next year.

“It suggest that the company’s key initiatives…are paying off,” Hottovy said.

Investors were also impressed, as shares of McDonald’s rose 6% to a new all-time high on Thursday.

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