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Tickers in this Article: MCD, BKC, PG, KO, PEP, DRI, WMT, YUM, COST
Many third quarter earnings releases are filled with references to "extraordinary" financial conditions, "unprecedented" challenges not seen since the 1930s and attempts to avoid "outright panic" when it comes to preserving existing business models. In a welcome contrast to the fear gripping many management teams, McDonald's (NYSE:MCD) CEO James A. Skinner's only macro observation during the company's earnings conference call was "these are interesting times to be doing business". In other words, the global burger giant continues to do well, despite global economic turmoil. After all, people still have to eat. A family can be fed at a lower cost by dining at fast food restaurants, which makes fast food restaurant chains somewhat defensive. (Read more about defensive stocks in Guard Your Portfolio with Defensive Stocks.)

Quarterly Recap
Skinner went on to boast that "McDonald's business is growing as we continue to be recession resistant". The proof was in the pudding as total global comparable sales improved 7.1%. The 4.5% comps in the U.S. looked impressive, especially considering the way global consumer titans like Coca-Cola (NYSE:KO), Pepsi (NYSE:PEP) and Yum! Brands (NYSE:YUM) struggle in the domestic market, while consumers cut back on everything but the basic necessities that can be found at retailers like Wal-Mart (NYSE:WMT) and Costco (Nasdaq:COST).

Apparently, McDonald's counts as a necessity. Given its affordable menu options, which can be quite healthy if one avoids Big Macs, "value-based" giant beverages and other Value Menu selections, this claim isn't so big of a stretch. The "McDonald's as necessity" theory is not a U.S. phenomenon, either. Comps moved ahead 8.2% in Europe and 7.8% in the Asian Pacific, Middle East, and African markets. Operating income in these overseas regions grew more than 20%, while the U.S. experienced a more than respectable increase of 9%.

The overall result was a 6% increase in revenue to $6.3 billion and an 18% jump in diluted earnings per share to $1.05, which exceeded analysts' projections. China stood out as the star performer as strong top-line trends were not off set by cost pressures and McDonald's was able to control commodity inflation pressure. Margin pressure was visible in Europe and the U.S., however, as a result of higher labor and raw materials costs. However, "ongoing sales momentum" makes life easier by providing leverage with which to spread operating costs and general and administrative expenses. The McDonald's business model has remained relatively unchanged since it started as a small burger chain in Des Plains, Illinois back in 1955. Now, that's a recipe for success!

Standout Stability
The stellar results benefit shareholders in a number of ways. For starters, the shares are down only about 9% over last year, which isn't great, considering fundamentals are holding up well overall. However, McDonald's shares surpass the S&P 500's more than 40% swoon and easily bests peers such as Burger King (NYSE:BKC), which is down 35%, and casual dining restaurants like Darden (NYSE:DRI) (known for its Red Lobster and Olive Garden brands), which has declined 31% so far in 2008.

Additionally, McDonald's prodigious cash flow generation is leaving plenty of excess capital with which to repurchase shares and grow the dividend. At the end of September, it announced a 33% increase to the dividend to 50 cents per quarter, which represents a current annual dividend yield of around 4%. Management boasted that a 4% yield doubles the 2006 payout and that the company has increased the dividend yearly since first announcing a dividend in 1976. McDonald's also is actively repurchasing stock, further juicing per share earnings. (Learn more about share repurchases in A Breakdown of Stock Buybacks.)

Bottom Line
According to current earnings expectations, McDonald's is trading at approximately 15 times earnings. Along with Wal-Mart and Procter & Gamble (NYSE:PG), McDonald's is one of the more richly valued of the Dow Jones Industrial Average constituents. Given the uncertain outlook for most stock these days, McDonald's definitely stands out as a steady performer. Further, any downside looks limited given the impressive results the company continues to post in all of its key operating regions.

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