McDonald's' Third Quarter Earnings Report

By Investopedia Staff | October 19, 2012 AAA

McDonald's (NYSE:MCD) announced its results for the third quarter on October 19, 2012. McDonald's franchises and operates fast food restaurants worldwide.

Earnings season is important to investors because it shows how much profit is left in the company's hand after deducting costs from revenue. SEE: 12 Things You Need To Know About Financial Statements

The Numbers: McDonald's managed to exceed estimates with stronger-than-expected EPS and revenues. The company reported $1.43 per share versus the $1.38 per share estimate and revenues of $7.15 billion versus the $6.94 billion estimate. Revenue fell 0.2% from the same period last year while EPS is down 1.4%. Slumping revenue in the last quarter ends McDonald's' streak of four consecutive quarters of revenue increases. McDonald's' net income for the third quarter fell 3.1% from last year's figures to $1.46 billion. This marks the second quarter in a row that the company's net income has fallen after profits tumbled 4.5% in the second quarter.

Management Quote: "While our sales momentum and current financial results reflect today's challenging conditions, we continue to see significant long-term opportunities for brand McDonald's and remain confident in the underlying strength of our business model," said McDonald's Chief Executive Officer Don Thompson. "We have the right plans in place to drive long-term profitable growth along with the experience and alignment throughout the McDonald's System to navigate the current environment."

A Look Back: Net income has increased 3.3% year-over-year on average across the last five quarters. The biggest gain came in the fourth quarter of the last fiscal year, when income climbed 10.8% from the year-earlier quarter.

Looking Ahead: Over the past 90 days, the average estimate for the fourth quarter has fallen from $1.59 per share to $1.54, indicating that analysts are growing pessisimistic about the company's performance next quarter. Decreasing earnings estimates is generally a negative sign as it suggests analyst believe future earnings to be weaker than previously anticipated. For the fiscal year, the average estimate has moved down from $5.71 a share to $5.55 over the last 90 days.

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