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McDonald’s MCD Earnings Up Despite Weak U.S. Economy


All signs to the contrary, U.S. consumers are still feeling the pinch of high unemployment, stagnant wages, rising health care costs, and rising gasoline prices. The fact that investment banks are reporting near record results and U.S. GDP is growing just don’t make a difference to many Americans. What does make a difference to people still struggling with the effects of the near collapse of the financial system is cheap stuff, like the $2.99 meal at McDonald’s (MCD) or lower prices on 10,000 items at Walmart (WMT). The message could not be sharper.

Yesterday, Goldman Sachs & Co. (GS) reported first quarter EPS of $5.59 on net profit of $3.29 billion and revenues of $12.78 billion. McDonald’s reported EPS of $1.00 on net income of $1.1 billion and revenues of $5.6 billion. Analysts had been expecting EPS of $0.96 on revenues of $5.53 billion.

Worldwide comparable sales improved 4.2% thanks mostly to increases greater than 5% in both Europe and Asia/Middle East/Africa. U.S. net income rose 12%, due almost entirely to beverage sales and the company’s value menu, including the dollar breakfast deal. The company claims to have increased its market share in Europe, leading to a 23% jump in net income. Net income rose 27% in Asia/Middle East/Africa.

Those companies, like Goldman Sachs, that are serving the wealthiest Americans are doing great. Likewise, companies such as McDonald’s, which serve mostly a much less wealthy clientele, are also doing great.

Same-store sales at McDonald’s are “at least as strong” as those just reported, according to the company’s CEO. Burger King (BKC), which reports later today, is projected to show EPS of $0.29, and Starbucks (SBUX) is looking for EPS of $0.25. Neither is expected to show the same revenue growth as McDonald’s, but sales should be good at both.

Every time that McDonald’s or one of its competitors talks about its sales growth and reports that the fastest growing items on the menu remain the value-priced meals, that’s another time that the so-called economic recovery has failed to reach down the majority of Americans. Taxpayers have rescued the financial system, but consumers are still searching for a lifeboat.

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Article printed from InvestorPlace Media,

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