Hit from dollar on McDonald's 2012 menu

Tue Jan 24, 2012 1:27pm EST
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By Lisa Baertlein

(Reuters) - McDonald's Corp's (MCD.N: Quote) strong December sales and fourth-quarter earnings failed to allay fears that exchange rates and increased spending will weaken profits in 2012.

Those worries sent shares of the world's biggest hamburger chain down 2.3 percent to $98.61 in midday trading.

McDonald's stock lately has been on a tear. It is up about 30 percent from a year ago and recently hit an all-time high of more than $102.

With shares looking expensive, Wall Street focused on imperfections in the company's outlook rather than its robust year-end results.

"Whilst results are strong, I would expect a period of consolidation going forward," Rikky Shoker, co-manager of the Credo Best Ideas Portfolio at Credo Group Ltd in London, said in an email.

"I would be cautious this year given (that the U.S. dollar) has strengthened so much and is expected to continue doing so. They generate nearly 70 percent of sales overseas," Shoker said.

Foreign exchange boosted McDonald's earnings by 19 cents per share in 2011 and will work against the company by roughly the same amount in 2012, analysts said.

That impact will be keenly felt in Europe, which is McDonald's top market for sales, they said, as the euro weakens against the U.S. dollar due to debt worries in the region.   Continued...

<p>Customer Steven Price sits at a table near a HDTV screen showing the new McDonald's Channel at a McDonald's restaurant in Norwalk, California in this file photo taken October 17, 2011. REUTERS/Fred Prouser/Files</p>