McDonald's (NYSE: MCD ) continues to beef up with its latest quarterly results. However, the stock might be getting a wee bit too pricey, even as the company's allure with bargain-hunting consumers begins to show some signs of apparent weakness.
Mickey D's net income increased 23%, to $1.22 billion, or $1.11 per share. Without one-time items, earnings dropped to $1.03 per share, which still exceeded analysts' expectations for $1.02 per share. Revenue increased 7%, to $5.97 billion, a gain that shrank to 2% when adjusted for currency effects. Global comps increased by 2.3% in the quarter.
While it was a good quarter, this Fool was disappointed by McDonald's failure to break out specific geographic information for its comps in its press release, as it usually does. Maybe that's because investors might have greeted its U.S. increase poorly.
A peek into McDonald's supplementary information shows that its U.S. comps in the fourth quarter increased just 0.1%. Granted, the company faced a difficult comparison to last year's 5% comps increase. Europe fared much better, with a 4.8% increase, and the Asia Pacific, Middle East and Africa segment had a 1.5% increase. That performance helped the company cap six straight years of positive comps in every geographic segment.
Overall, McDonald's has done well, given the continued difficult consumer environment. We already know that the much-vaunted holiday season presented a major challenge for many consumer-oriented companies. However, McDonald's might be getting slightly expensive right now, trading at 15.5 times earnings despite growing its income just 9% for the year.
Still, McDonald's is the leader in the fast food segment, and the best competitive efforts of Burger King (NYSE: BKC ) , Wendy's/Arby's (NYSE: WEN ) , and Yum! Brands (NYSE: YUM ) have done little to dethrone it. Plus, McDonald's P/E ratio remains a heck of a lot cheaper than restaurant stocks such as Cheesecake Factory (Nasdaq: CAKE ) and P.F. Chang's (Nasdaq: PFCB ) , even if it's projected to grow more slowly. The restaurateur's dividend yield of 3.5% is the special sauce atop this double-decker stack of impressive advantages.
Investors shouldn't ignore the drags on the American economy, or the difficult competitive environment, when considering investing in McDonald's. However, thanks to its long and successful track record of operational excellence, and the attractive lure of its bargain-priced fare, McDonald's remains a solid defensive stock for investors' long-term portfolios. I simply think that a slightly cheaper entry price might make the stock a little more appetizing.
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