Low prices help McDonald's beat profit expectations

Low prices help McDonald's beat profit expectations

Stock Market Predictions

LOS ANGELES (Global Markets) - McDonald's Corp (MCD.N) reported a higher-than-expected quarterly profit on Friday as low prices brought in strong sales in Europe and the United States. The company's share price rose 3.1 percent.

June sales at restaurants open at least 13 months were far stronger than analysts expected. During the month, same-restaurant sales were up 6.9 percent in the United States, 9.1 percent in Europe and 4.8 percent in the Asia/Pacific, Middle East and Africa unit.

Analysts were expecting June same-restaurant sales to rise 2 percent in the United States, 3 percent in Europe and 2 percent in the Asia/Pacific, Middle East and Africa unit.

Europe is McDonald's largest market for sales, contributing about 40 percent of revenue. The United States is a close second.

"It's the consistency of the everyday value message that has helped them a lot," said Lazard Capital Markets analyst Matthew DiFrisco, who added that McDonald's is good at adjusting its marketing to keep customers coming in.

McDonald's has been taking market share from its fast food peers for many months. It has benefited from improving food quality, adding Dollar Menu items and introducing high-margin beverages such as coffee and fruit smoothies to broaden its appeal beyond the young men who account for the biggest share of sales at most other fast-food chains.

It is also renovating restaurants in Europe and the United States.

Europe's top performers were France, Britain and Russia.

"Broadly speaking, there was just a little bit of a lift in people's willingness to spend in Europe," said Bernstein Research analyst Sara Senatore.

McDonald's global same-restaurant sales rose 5.6 percent in the second quarter. It forecast July results that are up 4 percent to 5 percent overall.

Janney Capital Markets analyst Mark Kalinowski, who correctly signaled that the June U.S. result would be significantly above what many analysts were targeting, said some key competitors are floundering.

In particular, he said, Carrols Restaurant Group (TAST.O) -- one of privately held Burger King's biggest franchisees -- saw same-restaurant sales at its Burger King BKCBK.UL restaurants fell 3.6 percent in the second quarter.

Rival Yum Brands Inc (YUM.N) recently reported another quarter of strong earnings based on growth in China, but its U.S. Taco Bell business is hurting from a dismissed lawsuit over the quality of its ground beef.

Shares in Yum, also the parent of the KFC and Pizza Hut chains, were up 0.4 percent. Stock in burger chain Wendy's (WEN.N) was up 1.3 percent.

Shares of McDonald's, which has 32,000 restaurants, were up $2.69 to $89.22 on the New York Stock Exchange in the middle of the trading day. The shares closed at an all-time high of $86.54 on Thursday.

HOLDING THE LINE ON PRICES?

Second-quarter net income rose 15 percent to $1.41 billion, or $1.35 per share, topping the average analyst forecast of $1.28 per share, according to Thomson Global Markets I/B/E/S.

Foreign currency translation boosted earnings by 10 cents per share in the second quarter.

Revenue rose to $6.91 billion from $5.95 billion.

Analysts said the strong results showed that McDonald's has pricing power.

"We will continue to consider future price increases," McDonald's Chief Financial Officer Peter Bensen said on a conference call with analysts.

McDonald's has raised prices on some premium products to help offset higher food costs. The company still expects those costs to rise 4 percent to 4.5 percent in the United States and Europe this year.

McDonald's wants customers to keep coming through its doors, so Bensen said it would be "judicious" with additional price hikes.

"You can bet their competitors wish they would take pricing," said Victory Capital Management analyst Dave Kolpak. "You can't do it if McDonald's doesn't. They're putting the heat on the competition."

(Editing by Gerald E. McCormick and Lisa Von Ahn and Matthew Lewis)

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DragonWave cuts revenue view on shipment delays

DragonWave cuts revenue view on shipment delays

Stock Market Predictions

(Global Markets) - Telecom equipment maker DragonWave Inc (DWI.TO) (DRWI.O) cut its first-quarter revenue forecast by 27 percent to $11 million, mainly due to a shipment delay by a North American customer, sending its shares down 8 percent in morning trade.

The company, hit hard as its key customer Clearwire has been struggling to raise cash to complete a high-speed wireless network in the United States, had last month forecast revenue of $15 million.

DragonWave, however, did not name the North American customer in its statement on Friday.

The company, which makes radio transmitters used in cellular networks, said the customer deferred a significant shipment of equipment.

DragonWave said regulatory delays also affected revenue from a customer in the Middle East.

Shares of Ottawa-based DragonWave were down 7 percent at C$5.63 on the Toronto Stock Exchange in morning trade. Its Nasdaq-listed shares were down 8 percent at $5.76.

(Reporting by Amruta Sabnis in Bangalore; Editing by Saumyadeb Chakrabarty and Gopakumar Warrier)

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Schlumberger quarterly results jump, shares rise

Schlumberger quarterly results jump, shares rise

Stock Market Predictions

NEW YORK/SAN FRANCISCO (Global Markets) - Schlumberger Ltd (SLB.N) beat estimates with a 64 percent jump in profit on strong U.S. demand and deepwater drilling, while international activity showed clear signs of improvement after a long wait.

Schlumberger shares rose 3 percent in early trading, as the world's largest oilfield services company delivered its first set of market-pleasing results this year.

The stronger North American trend drove an estimate-beating 54 percent jump in earnings for rival Halliburton Co (HAL.N) this week, though Halliburton shares were little changed on Friday.

While half of Halliburton's revenue comes from Canada and the United States, the region accounts for less than a third for Schlumberger, which sees big improvements elsewhere led by a dramatic increase in Saudi Arabian activity.

"None of the other countries are executing with the speed of Saudi. So yes, it's going to come, but it's not there yet," Chief Executive Andrew Gould said on a call with analysts -- his last before he retires as CEO and hands off the top job to 44-year-old Paal Kibsgaard.

Iraq is also a key factor in the improving international outlook, along with the North Sea and East Asia, he added.

Asked about Iraq, where many oil firms have found it hard to establish a foothold, Kibsgaard said it is likely to be Schlumberger's seventh biggest out of 14 markets in the Middle East and Asia, before improving to No. 3 next year.

Oil and gas companies' spending picked up far more quickly in North America than elsewhere this year as oil prices surged and producers rushed to tap fields rich in liquids.

Schlumberger said onshore U.S. strength and demand from the world's deepwater regions drove second-quarter earnings, while Gulf of Mexico activity was improving after the drilling halt that followed last year's BP Plc (BP.L) Macondo oil spill.

PROFIT PLEASES WALL ST.

Second-quarter profit rose to $1.34 billion, or 98 cents a share, from $818 million, or 68 cents a share, a year earlier.

Leaving out one-time items, Schlumberger earned 87 cents a share from continuing operations, topping the analysts' average forecast of 85 cents as compiled by Thomson Global Markets I/B/E/S.

Revenue rose 62 percent to $9.6 billion, topping the $9.2 billion that analysts had expected.

The strong North American performance offset disappointing earnings in Europe, the former Soviet states and the Middle East, UBS analyst Angie Sedita said, though she also saw high energy prices eventually driving those businesses as well.

"Schlumberger offers the best play on the international ... and deepwater markets, which should slowly start to improve later this year, with greater gains in 2012," Sedita said in a note to investors.

Gould expressed optimism about deepwater in particular, a view supported by the dozens of new rigs in the pipeline.

"There have never been so many deepwater rigs on order. So to the extent that we have exploration success in deepwater ... I think that the exploration cycle can be a lot more sustained than it was last time, when it was abruptly terminated by the financial crisis and by the Macondo incident," he said.

Gould also said the steep ramp-up in demand for services in the U.S. market and elsewhere is straining the sector, making it difficult to get equipment and staff to customers.

Shares in Schlumberger climbed 3.3 percent to $93.93 in morning trading. At Thursday's close, the stock had gained 9 percent so far this year, lagging a near-12 percent rise in the Philadelphia Stock Exchange Oil Service Index .OSX.

The improving global outlook gave a 2.6 percent boost to shares of Weatherford International Ltd (WFT.N), which is making a big push outside the United States, while U.S.-geared Baker Hughes Inc (BHI.N) fell 0.8 percent.

(Additional reporting by Krishna N Das in Bangalore; Editing by Derek Caney and Gerald E. McCormick)

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