A surprise McDonald's rise

CHICAGO — McDonald's Corp. said Thursday that stronger-than-expected September sales pushed preliminary third-quarter profit well above Wall Street estimates, backed by a comeback in Europe and accelerated U.S. momentum that have its two biggest markets surging.

The upside surprise from the world's largest fast-food chain prompted several analysts to upgrade its stock. McDonald's shares jumped to the latest in a series of six-year highs, leading the Dow Jones industrial average into record territory.

Shares in the company, based in Oak Brook, Ill., rose 98 cents, or 2.4 percent, to close at $42.23 on the New York Stock Exchange after reaching $42.46, their highest price since Jan. 20, 2000.

"The U.S. continues to roll along while Europe continues to see momentum build," said Citigroup analyst Glen Petraglia in a report to investors about the company.

Morgan Stanley's Mark Wiltamuth said that with both McDonald's major markets showing strong sales trends, he expects the better results from the long-lagging European market to drive "a second wave of recovery for the company."

McDonald's forecast third-quarter earnings of 68 cents per share, well above the 63-cent consensus estimate of analysts surveyed by Thomson Financial and up 17 percent from a year ago. That includes a penny-per-share expense relating to impairment and other charges primarily in its Asia/Pacific, Middle East and Africa operation.

Extended hours, the popularity of its breakfast items and new products at its U.S. restaurants have spearheaded the chain's three-year run of improved results. But it was strong sales from Europe that helped carry the company in the third quarter.

Driven by strong growth in Europe, McDonald's systemwide same-store sales, or those from restaurants open at least 13 months, climbed 9.8 percent in September and 8.4 percent in the third quarter. Excluding non-McDonald's brands, the increases were 7.7 percent for the month and 5.8 percent for the quarter.

European same-store sales climbed 9 percent in September and 7.6 percent during the quarter, with growth especially strong in Germany, France and Britain. That bested even strong U.S. sales, which grew 7.1 percent in September and 4.1 percent in the quarter, lifted by breakfast sales and the new chicken Snack Wrap introduced in late July.

The company did not discuss results in detail ahead of its full earnings report due out Oct. 19. But CEO Jim Skinner attributed the ongoing improvement in Europe after a lengthy slump to a successful mix of premium and value prices and to targeting customers with locally relevant items.

Worldwide, he said, "We are increasing relevance, enhancing menu variety and improving customer convenience."