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Dividend-growth gem McDonald's (NYSE:MCD) announced decent February results this past Friday morning. On a reported basis, global same-store sales dropped 1.5% year over year, but when adjusted for a calendar shift, February same-store sales actually increased 1.7% globally.

The U.S. continued to be a weak spot, with same-store sales down 3.3% on a reported basis and flat on a comparable basis. This occurred during a month in which the company had several product introductions, but the firm also had to lap an incredibly difficult 11.1% same-store sales growth rate posted in February 2012. We're not incredibly disappointed in the U.S., and we will see comparisons get much easier toward the back half of the year.

Europe sales were actually quite robust, down 0.5% on a reported basis, but up 2.7% on a comparable basis. We wouldn't go so far as to say it's reflective of improving European economic fundamentals, but it does show just how successful the company is at extending store hours and expanding breakfast offerings. This was one of the huge U.S. drivers over the past few years, and it appears it will help boost the company's fortunes in Europe as well. McDonald's also noted that results in the U.K. and Russia were strongest.

The Asia-Pacific, Middle East, and Africa segment was a pleasant surprise, with same-store sales declining 1.6% on a comparable basis, but up 1.5% excluding the calendar shift. What we found most shocking was that the company pointed to strength in China after sales dipped in the wake of the Yum Brands (NYSE:YUM) poultry scandal. Perhaps the nation has moved on from the incident, so KFC could see the slide in its sales moderate in 2013. The segment also benefited from strong results in Australia, partially offset by a slide in Japan. We were incredibly pleased with the firm's performance in APMEA.

Going forward, we believe the company could have a difficult time holding pricing down, especially on the dollar menu. Owner-operators are already getting squeezed on margins, and we do not believe they will be happy stomaching more margin compression. On the other hand, raising prices could materially lower sales unless new products are able to drive sales.

Overall, we thought February results were positive for the company. 2013 will be a challenge, but we don't think that's a result of a soft economy, but rather strong competition in the quick serve restaurant space. While we do not believe the firm looks undervalued at current levels, solid same-store sales growth could lead to earnings expansion and subsequently share repurchases and dividend growth. McDonald's management team is very adept at allocating free cash flow, and we think 2013 is shaping up to be slightly better than previous expectations. Still, we're not rushing to add the company to our actively managed portfolios at this time.

Source: McDonald's February Shows Stabilization, Not Crisis