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McDonald's Hits All-Time High as Promotions, Renovations Boost Sales

Fast-food chain McDonald's Corp. (NYSE:MCD) reported strong second-quarter earnings before the opening bell on Friday, pushing shares to an all-time high of $218.15 in premarket trading.

The popular Chicago-based restaurant posted adjusted earnings of $2.05 per share, which were in line with Refinitiv's estimates. While revenue grew 3% on a constant currency basis from the prior-year quarter to $5.34 billion, topping expectations of $5.33 billion, the company said net sales were negatively impacted by its refranchising initiative. Although selling corporate-owned stores to franchisees helped cut costs, accounting differences hurt reported revenue.

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Global same-store sales increased 6.5%, which was ahead of analysts' projections of 5.1% growth. In the U.S. business, same-store sales grew 5.7%, beating the anticipated 4.5% increase as promotions like the 2 for $5 Mix and Match offer and tech-focused store renovations proved to be popular among consumers.

In a statement, President and CEO Steve Easterbrook said the fast-food chain, which is known for its Big Mac burgers, Chicken McNuggets and Egg McMuffins, has achieved "16 consecutive quarters of positive global comparable sales."

"By putting our customers at the center of all our efforts to run great restaurants, enhance the customer experience and provide delicious menu offerings, we will continue to successfully execute our Velocity Growth Plan," he added.

In an attempt to replicate the success it has seen abroad, CNBC reporter Amelia Lucas said McDonald's plans to invest $1 billion in 2019 to modernize its American locations with self-order kiosks and other technology-focused upgrades as well as expand its delivery services.

"By engaging our guests on their terms, whether it's through delivery, an enhanced dining experience at one of our Experience of the Future restaurants, or through our evolving digital offerings, we're becoming a better McDonald's," Easterbrook said. "We will continue to focus on our customers with innovative solutions to further elevate the guest experience and drive growth."

With a market cap of $165.71 billion, shares of McDonald's were up 1.2% at $217.02 after the market opened on Friday. After gaining 3% in 2018, GuruFocus estimates the stock has climbed another 22% year to date.

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According to the GuruFocus Industry Overview page, McDonald's is the largest company in the restaurant sector, followed by Starbucks Corp. (NASDAQ:SBUX), Yum Brands Inc. (NYSE:YUM), Chipotle Mexican Grill Inc. (NYSE:CMG), Yum China Holdings Inc. (NYSE:YUMC), Darden Restaurants Inc. (NYSE:DRI), Domino's Pizza Inc. (NYSE:DPZ), Aramark (NYSE:ARMK) and Dunkin' Brands Group Inc. (NASDAQ:DNKN).

Of the gurus invested in McDonald's, Pioneer Investments (TradesPortfolio) has the largest stake with 0.30% of outstanding shares. Other top shareholders include Jim Simons (TradesPortfolio)' Renaissance Technologies, Steven Cohen (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Robert Olstein (Trades, Portfolio), Dodge & Cox, Mairs and Power (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Tom Russo (Trades, Portfolio) and Diamond Hill Capital (Trades, Portfolio).

Disclosure: No positions.

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