Early Reactions To McDonald's Q3 Earnings Beat

McDonald's Corp MCD reported its third-quarter results, which sent shares higher by more than 5 percent.

What To Know From Q3

McDonald's said it earned $2.10 per share in the third quarter on revenue of $5.369 billion versus expectations of $2.00 per share and $5.35 billion. Operating income for the quarter fell from $3.0794 billion a year ago to $2.4177 billion; Last year's results benefited from a gain of $850 million from the sale of the China and Hong Kong business.

Excluding the one-time gain along with restructuring and impairment charges, consolidating income would have been higher by 2 percent or 4 percent on a constant currency basis.

Comparable U.S. sales rose 2.4 percent in the U.S. market as the company said it saw a growth in average check from product mix shifts and price increases. Every geographic region recorded positive comps and global comparable sales rose 4.2 percent in the quarter.

McDonald's returned $1.7 billion to shareholders in the form of dividends and share purchases. The company also announced a 15-percent increase in the quarterly dividend as of the fourth quarter to $1.16 per share.

On the conference call, CEO Steve Easterbrook said the company opened 375 restaurants in China so Far in 2018 and expects to open 400 stores in 2019.

Stephens: U.S. Better Than Expected

McDonald's 2.4-percent same-store U.S. sales growth was in-line if not slightly better than lowered investor expectations due to increasingly difficult comparisons and "soft" industry data, Stephens' Will Slabaugh said in a note. Outside of the U.S., performance "remained solid," especially in the Foundational segment which saw a 6-percent comp growth and the High Growth segment saw a 4.6-percent comp growth.

Despite holding a constructive view over the longer term, the analyst said McDonald's performance iin the U.S. appears to represent a normalized range.

The firm maintains an Equal-Weight rating on McDonald's stock with an unchanged $165 price target.

RBC: Better Than Expected Quarter

McDonald's is doing "better" in the U.S. versus its fast food peers and "much better" internationally, RBC Capital Markets' David Palmer told CNBC.

The company is seeing some margin headwinds from store improvements and labor expenses, however, many of the store improvements the company is looking to implement in the U.S. has mostly been completed in international markets and contributed to its success overseas.

Morningstar: Success Story

Heading into Tuesday's print, some investors were concerned the results would show a top-line slowdown, Morningstar's R.J. Hottovy told CNBC. It's evident any concern is now "overblown" as the better-than-expected revenue suggests the modernization of stores and technology initiatives are working.

Despite a strong performance internationally, McDonald's remains very much a U.S.-based story, he said. The region still accounts for around 35 percent of total operating profit and the 2.4-percent comp sales growth shows no slowdown from value menu items and discounting.

McDonald's also offers an attractive dividend yield of 2.64 percent and the stock "generally holds up pretty well" in the event of a cyclical downturn in the overall market, he said.

The stock traded around $175.91 at time of publication.

Related Links:

Guggenheim Says McDonald's Is Setting Up Well For 2019, Upgrades Stock To Buy

Wells Fargo Raises Restaurant Price Targets Ahead Of Q3 Reports