McDonald's Is Not Immune To Europe's Economic Plague

| About: McDonald's Corporation (MCD)

By Katey Stapleton, Benzinga Staff Writer

Automotive companies are not the only American-based businesses feeling the pressure of gloomy European financial times. The food industry has also begun to report international sales misses, with McDonald's (NYSE:MCD) heading up the dismal earnings.

With a global rise of only 3.3% last month, overall sales were lower than what analysts had previously expected for MCD. China and Japan did not deliver at a time when it has become crucial for all international sectors to pull their weight in dough. Japan's same store sales [SSS] dropped 11% in May, with China lowering its borrowing costs for the first time in four years.

A poor European economy definitely did not serve a happier meal, as analyst's estimates of 5.1% increased sales in the troubled continent proved to be largely overshot, with the golden arches experiencing just 2.9% growth.

Underwhelmed research firms reduced estimates and commented on the struggle the world's largest restaurant chain currently faces.

"Europe's +2.9% was weaker than Street's 5.1%, as economic headwinds continue to restrain comps. Germany had been a positive contributor YTD, but turned negative in May as deal-driven consumers tightened their spending habits," Oppenheimer said in a report on Friday.

Analysts believe June will likely become more difficult, as comps could be in the -1% to +1% range, vs. the Street's +3%, and they're not the only one's projecting tougher times ahead.

MCD's management said ongoing global economic insecurity, unstable measures in Europe and rising administrative costs damaged the current quarter, with unfavorable foreign currency exchange rates slated to lower second-quarter profits between 7 cents and 9 cents per share.

Obviously, MCD's buns are far from being toast as the mega burger flipper is the largest of its kind. However, the company is definitely not immune to the fiscal disease spreading throughout the world.

MCD is currently trading at $87.03, down 13.23% year-to-date.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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