McDonald's Serves Up Profits
Fast-food king McDonald's cooked up an 11 percent increase in first-quarter profits, fueled by strong sales of kids' meals, a solid overseas performance and the implementation of a new food-preparation system.
In the latest quarter, the company said it earned $402.7 million, or 29 cents a share, up from $362.2 million, or 26 cents, a year earlier. That met the consensus estimate of analysts surveyed by First Call Corp. Revenue rose 8 percent to $3.04 billion from $2.8 billion.
Shares of McDonald's (MCD), a component of the Dow Jones Industrial Average, rose 1/4 to 45 5/8 in recent trading.
Despite economic difficulties in many foreign markets where the restaurant chain operates, McDonald's said operating profits rose 11 percent in the Asia/Pacific region, 10 percent in Europe and 2 percent in Latin America. And Latin American results could improve further in the near future if the key market of Brazil rebounds.
"We are cautiously optimistic that the Brazilian economy will improve as we move through the year," said Jim Cantalupo, McDonald's chief executive, in a statement.
Sales of Happy Meals, designed for young kids, also posted a strong performance. The company boosted those sales through marketing moves in which it gave away popular Winnie the Pooh and Furbies dolls.
McDonald's also said that more than 5,500 U.S. restaurants have installed its so-called "Made for You" food preparation system, which is supposed to improve the quality of the food and lower costs. The company aims to convert all its domestic affiliates by the end of the year.
PepsiCo beats forecasts
Strong performance at PepsiCo's Frito-Lay unit helped the soft drink giant beat first-quarter earnings forecasts by a penny Thursday.
PepsiCo (PEP) said it earned 25 cents per share vs. 24 cents in the year-ago period. A survey of analysts by First Call predicted earnings of 24 cents per share.
Revenue was $5.1 billion, up from $4.4 billion in the year-ago period and reflected "strong performance" at Frito-Lay North America, the company said.
Shares of Pepsi jumped 1 7/8 or 5 percent to 40 13/16 on Thursday.
"Frito-Lay had a great quarter," said Warburg Dillon Read analyst Bryan Spillane. "It had good pricing, its revenue is up, it's ahead on volume and it gained market share."
Roger Enrico, PepsiCo chairman and CEO, said in a statement that Frito-Lay North America's performance in the quarter was "superb across the board" with a sales boost of 7 percent. Pepsi, which bought Tropicana last year, said the juice unit performed well.
"Tropicana exceeded our aggressive expectations," he said. "All-in-all, we're off to a fine start in 1999."
Pepsi said its plans to commit approximately $3 billion for share repurchases over the next three years.
The report marks Pepsi's first quarterly financial results since it offered about 60 percent of its Pepsi Bottling Group in an IPO (PBGearlier this month.
Net cash proceeds to PepsiCo were $5.5 billion and a non-cash pre-tax gain of approximately $1 billion will be reflected in its second quarter 1999 results.