(Update adds detail on commodity costs and foreign exchange impact.)
By Paul Ziobro
Of DOW JONES NEWSWIRES
NEW YORK -(Dow Jones)- McDonald's Corp.'s (MCD) third-quarter earnings rose 5.9% with strong September same-store sales helping the company top analyst estimates.
The company also said it expects same-store sales to stay positive in October, despite a decline in informal dining out worldwide.
Fast-food chains have held up better than full-service restaurants in the recession, though all have begun to see sales slow as unemployment remains stubbornly high.
McDonald's has begun to show some rust in its armor and is facing pressure to continue to show sales growth beyond strong numbers from last year. September's results could put to rest some fears that same-store sales could dip into negative territory, as McDonald's posted gains of 5.1% worldwide with gains of 3.2% in the U.S., 6.9% in Europe and 5.3% in its Asia-Pacific, Middle East and Africa region.
"For the next three months, they will most likely hang in there with flat to slightly positive" same store sales, Oppenheimer & Co. analyst Matthew DiFrisco says.
McDonald's shares were recently up 3% premarket at $60.09.
McDonald's and competitors such as Burger King Holdings Inc. (BKC) and Wendy's, part of Wendy's/Arby's Group Inc. (WEN) have been adding new products--ranging from thicker burgers to value items--to lift sales. The sector is looking to rebound from disappointing summer sales where high unemployment among teenagers failed to give sales a seasonal lift. Breakfast sales have been hurt by fewer workers stopping during their commutes.
For the third quarter, McDonald's reported a profit of $1.26 billion, or $1.15 a share, up from $1.19 billion, or $1.05 a share, a year earlier.
Revenue decreased 4% to $6.05 billion on currency changes while same-store sales, or sales at restaurants open at least 13 months, rose 3.8% globally. The biggest gainer was Europe.
Analysts polled by Thomson Reuters most recently forecast earnings of $1.11 on revenue of $6.1 billion.
Operating margin rose to 31.9% from 29.1% as commodities prices eased. McDonald's now expects to see commodity costs rise 2% in the U.S. and 3% in Europe in 2009, compared to an earlier view that costs would be up 3% to 3.5%.
The company's U.S. operations delivered 6% earnings growth, aided by its Angus burgers and McCafe espresso-based drinks. Europe saw 10% growth while Asia, Pacific and the Middle East posted 21%, led by Australia and China results.
While currency translation has been a headwind to international companies earlier this year, McDonald's said that exchange rates should help fourth-quarter revenues by about $350 million and earnings by 6 cents a share as the U.S. dollar has weakened.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com
(Tess Stynes contributed to this article.)