Foreign Franchises Pay Off for McDonald’s

The importance McDonald’s (NYSE:MCD) has placed on foreign investments seems to have paid off as the fast-food giant posted substantial revenue growth in the fourth quarter. The news legitimized the company’s 30 percent stock return in 2011.

Total revenues for the company climbed to $6.82 billion, a gain of 10 percent from the same quarter last year, with the regions of Asia-Pacific, Middle East and Africa showing the most growth as forecasted. The company’s heightened focus on East Europe seems to have reaped rewards, with the region showing healthy revenue growth despite the debt crisis.

McDonald’s net income rose 10.8 percent year-over-year to $1.38 billion, with all segments looking strong. In the future the company may have a hard time generating more profits since a great deal of its growth is due to increasing earning power of its franchisee restaurants. McDonald’s foreign regional margins were 87.7 percent for 2011 — a hard figure to beat. Another factor hitting profits is the company’s plan to open a large number of new restaurants in China, which will initially have lower margins.

Here’s how MCD shares traded today:

McDonald’s Corp. (NYSE:MCD): MCD shares recently traded at $98.40, down $0.65, or 0.66%. They have traded in a 52-week range of $72.89 to $102.22. Volume today was 6,112,567 shares versus a 3-month average volume of 5,495,430 shares. The company’s trailing P/E is 18.67, while trailing earnings are $5.27 per share.

To contact the reporter on this story: Gina Smith at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com