(Update adds analysts comment and updates share price.)
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 rose $1.49, or 2.6%, in recent trading to $59.82. Wendy's/Arby's Group Inc. (WEN) also rose 2.6% to $4.25, while Burger King Holdings Inc. (BKC) fell 0.2% to $18.14.
McDonald's and competitors such as Burger King and Wendy's have been adding new products--ranging from thicker burgers to value items--to lift sales.
McDonald's has concentrated on the higher-end with its McCafe coffee line and new Angus Burger, which both helped drive U.S. sales. While lower priced items on the Dollar Menu help attract value conscious customers, McDonald's expansion into more expensive items is taking direct aim at patrons of full-service restaurants, with billboards for Angus burgers proclaiming, "No reservation required."
After a multi-year plan to boost sales through extended hours and remodeled stores, McDonald's is growing more reliant on new products to grow the top-line. It plans to expand its beverage line next year to include smoothies and frappes.
"They have a lot of nice sales layers to continue to drive same-store sales," Stifel Nicolaus & Co. restaurant analyst Steve West said.
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%.
McDonald's also expects that the weak U.S. dollar should help fourth-quarter revenues by about $350 million and earnings by 6 cents a share.
The company's U.S. operations delivered 6% earnings growth. Europe saw 10% growth while Asia, Pacific and the Middle East posted 21%, led by Australia and China results.
-By Paul Ziobro, Dow Jones Newswires; 212-416-2194; paul.ziobro@dowjones.com
(Tess Stynes contributed to this article.)