McDonald's delivers global growth as U.S. challenges persist

By Aishwarya Venugopal

(Reuters) - McDonald's Corp's strong performance outside the United States drove better-than-expected results in the final quarter of 2018, as it battled punishing competition at home with initiatives ranging from $1 coffees to Uber Eats deliveries.

Same-store sales in the United States rose 2.3 percent in the fourth quarter, the company said on Wednesday, the slowest pace in nearly two years and missed Wall Street estimates for the third straight quarter.

Comparable sales in the company's international markets including UK, Germany and Australia grew to a better-than-expected 5.2 percent, helping global same-store sales jump 4.4 percent, topping estimates of 3.90 percent.

"The persistent strength of the outside U.S. markets is especially impressive in-light of slowing growth in China and economic softness in Europe, particularly in the UK where MCD's business appears nearly unstoppable," said Bernstein analyst Sara Senatore.

The company's shares, a component of the blue-chip Dow Jones Industrial index, were up 2.5 percent at $186.70 in morning trading.

The world's biggest fast-food chain has been offering cheap breakfast options that include $1 coffees, sausage muffins and biscuits in the United States to compete better with cheaper alternatives offered by rival chains and local fast-food outlets. McDonald's recently launched promotions such as free bacon for an hour to drive traffic to U.S. stores.

Neil Saunders, managing director of GlobalData Retail, said there was no doubt that breakfast offerings have become far more competitive and believe that further innovation and deals will be required to keep the momentum going.

McDonald's is also in the process of remodeling about 14,000 U.S. restaurants by introducing digital ordering kiosks and new mobile order, pay and pickup services, looking to replicate the success of these moves overseas.

The food chain is also removing artificial preservatives from classic burgers, while switching to fresh rather than frozen beef for its Quarter Pounders to cater to changing consumer tastes.

Total revenue fell 3 percent to $5.16 billion in the fourth quarter, largely due to the company selling restaurants to franchisees. That was in line with estimates.

Net income more than doubled to $1.42 billion, or $1.82 per share, in the quarter ended Dec. 31 from a year earlier, when the company incurred a charge related to the U.S. tax overhaul.

Excluding items, the company earned $1.97 per share, beating estimates of $1.89.

The company also kept most of its long-term targets intact.

(Reporting by Aishwarya Venugopal and Uday Sampath in Bengaluru; Editing by Shounak Dasgupta and Sriraj Kalluvila)