The company's fourth-quarter earnings report provided a stark testimonial to the effectiveness of McDonald's strategy and management. Reporting earnings of 87 cents per share for the quarter, MCD exceeded the 2007 fourth-quarter results after adjusting for a 2007 tax bonus to earnings of 33 cents per share.
The company reported a 3% drop in revenues for the quarter. Excluding currency exchange rates, the global company reported an increase in revenues of 5% for the period.
Operating expenses for McDonald's dropped by 8% for the period, and net operating margin was 19.4%. These results are particularly impressive at a time when the prices of beef, cheese and other sandwich ingredients were increasing.
Globally, same-store sales increased by an impressive 7.2%. In the United States, they jumped 5%.
The introduction of new food items, including the Southern Style Chicken Biscuit, was well-received and added to the company's revenue. The expansion of McDonald's high-end coffee drinks also found a willing market among consumers looking to economize.
Several key corporate decisions during the last two years helped the company to retain its focus on its core business. The sale of McDonald's ill-fated Boston Markets investment in 2007, and the sale of Chipotle Mexican Grill (NYSE: CMG) in 2006, have proven to be wise moves, as each of these operations continues to underperform as restaurants and as investments.
In the company's earnings report, McDonald's announced its intention to invest $2.1 billion in capital expenditures this year. In addition to remodeling and upgrading stores, McDonald's has set a target of opening 1,000 new locations in 2009. Much of this investment will be in the emerging economies of Brazil, Russia, India and China.
There are many reasons for McDonald's success in a recessionary economy. One of the keys is the company's ability to consistently deliver popular fast food items at a low cost. While the quality of the food may be average, the price is cheap at a time when consumers worldwide are looking for low-cost options for their dining experiences.
McDonald's expansion into emerging markets has also benefited from being somewhat of a novelty in those areas. Consumers are curious and willing to sample the food. The quality of the experience has produced repeat business and growing sales.
Entry into these markets has been facilitated by the high level of recognition of the Golden Arches brand, one of the most recognizable in the world.
Louis Navellier's PortfolioGrader Pro, which offers free ratings for nearly 5,000 Wall Street stocks, rates MCD an A or Strong Buy.