McDonald's is Hitting on All Cylinders

Implications: 1.  McDonald's is performing at a high level driven by core growth platforms at home in the U.S. as well as abroad.

2.  The fast food industry itself is starting to show signs of life after experiencing softness over the past year or so.  While maybe not as profoundly as McDonald's,  expect other key operators to experience renewed growth.

Analysis: McDonald's is definitely hitting on all cylinders.  Their improvement in the domestic market is off the charts at +7%.  They have done an excellent job of identifying an opportunity to expand sales through daypart management.  Their same store sales growth is largely driven by the positioning of the snack wrapper as well as a renewed focus on breakfast.  Additionally, same store sales growth is significantly higher in Europe and Asia.

Some level of the improved sales performance is attributable to higher traffic counts across the fast food segment in general.  Another firm seeing strong gains recently is Yum Brands recently announced strong growth in EPS, largely driven by strength in Asia and other non-U.S. markets.  In addition, Wendy's also has demonstrated strong growth driven by same store sales increases in the U.S. market of +4%, also well above the industry average.

Two key factors appear to be contributing to the growth in this segment.  First of all, fast food operators faced with slumping sales in recent periods were forced to get back to the basics and focus on menu management and good strong execution.  In addition, foot traffic throughout the segment has improved over the second half of 2006 and shows no sign of slowing.