McDonald's Still a Winner

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

Investors didn't seem too impressed by McDonald's (NYSE: MCD  ) quarterly results early today, but those who are truly thinking long term must realize the fast food giant is one of the keepers investors should be seeking out these days.

True, fourth-quarter profit did drop at McDonald's. Net income fell 23% to $985.3 million, or $0.87 per share. However, bear in mind that last year's fourth-quarter earnings were boosted by a $0.33 per share tax benefit. Operating income increased 11% to $1.50 billion.

Revenue dipped 3% to $5.57 billion, with the decline resulting from a weaker dollar. However, McDonald's comps continue to be impressive, despite these difficult economic times. Global comps surged 7.2%, with U.S. comps up 5%, Europe up 7.6%, and Asia/Pacific, Middle East, and Africa up 10%.

Like Wal-Mart (NYSE: WMT  ) , McDonald's has been one of those companies that has proven itself resilient despite our ongoing and serious recession. And of course, it's obvious both companies appeal to consumers because they provide wares for those on tight budgets.

Rivalry from other quick-stop restaurant companies like Burger King (NYSE: BKC  ) , Yum! Brands (NYSE: YUM  ) , and Wendy's/Arby's (NYSE: WEN  ) Group haven't been able to put a dent in McDonald's momentum, either.

McDonald's has drifted away from its 52-week high of $67, and it's currently trading at 15 times earnings. That may sound like a premium compared to so many retail and restaurant stocks that are trading at single-digit multiples these days (I just noticed high-end restaurant stock Ruth's Hospitality (NYSE: RUTH  ) is trading at 3 times earnings), but it seems to me McDonald's premium is worth it, considering that it is performing so well and is a dividend payer to boot.

After all, some of these supposedly cheaper stocks are cheap for a reason, as they struggle in the current economic climate and may have other troubling issues, like too much debt. (For example, Ruth's Hospitality recently said it probably won't be in compliance with one of its debt covenants, so there's a good reason for the low multiple.)

The coming year may present some difficult comparisons for McDonald's, considering it has excelled for several years running. However, I believe there is still gold in the Golden Arches, given its competitive strengths; it's a solid defensive stock in these troubled times.

Pick up some fast Foolishness:

Wal-Mart is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletters today, free for 30 days.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy.

Read/Post Comments (1) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 26, 2009, at 4:00 PM, madmilker wrote:

    not everyone likes a burger to eat or flip! Is America coming down to not making nothing but only consuming what they make.....tats sad!

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 817054, ~/Articles/ArticleHandler.aspx, 10/21/2016 5:46:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 8 hours ago Sponsored by:
DOW 18,162.35 -40.27 -0.22%
S&P 500 2,141.34 -2.95 -0.14%
NASD 5,241.83 -4.58 -0.09%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/20/2016 4:02 PM
MCD $110.57 Down -0.69 -0.62%
McDonald's CAPS Rating: ***
BKC.DL $0.00 Down +0.00 +0.00%
Burger King Holdin… CAPS Rating: **
WEN $10.87 Down -0.12 -1.09%
Wendy's CAPS Rating: ***
WMT $68.73 Down -0.16 -0.23%
Wal-Mart Stores CAPS Rating: ***
YUM $86.20 Down -1.04 -1.19%
Yum! Brands CAPS Rating: ****