McDonald's Corp (MCD.N) reported higher quarterly profit on Friday, boosted by better-than-expected sales at established restaurants in the United States and its top revenue market of Europe.
McDonald's shares rose 2.1 percent as investors breathed a sigh of relief over results from Europe, where national debt woes, widespread austerity measures and high unemployment have made demand for American fast-food volatile.
The first-quarter results, boosted by a focus on low-priced food, new menu items, restaurant makeovers and longer operating hours, helped McDonald's continue to outpace rivals like Wendy's Co (WEN.O) and Burger King Corp BKCBK.UL.
Sales at restaurants open at least 13 months were up 7.3 percent, more than the 6.7 percent increase expected by analysts polled by Consensus Metrix. Same-restaurant sales rose 5 percent in Europe and 8.9 percent in the United States, where mild weather has helped lift restaurant sales.
"People have been most concerned about Europe and it looks like it's OK," said Bernstein Research analyst Sara Senatore.
Investors had good reason for caution.
McDonald's global same-restaurant sales for February missed Wall Street's target due to a harsh winter and economic upheaval in Europe.
Europe's results for March, reported on Friday, topped expectations as McDonald's increased its focus on low-cost food offered via Germany's "value menu" and the United Kingdom's "saver menu."
"France is also evaluating options to further strengthen value perceptions at a time when a number of new austerity measures are impacting consumers' confidence and their disposable income," said Chief Operating Officer Don Thompson, who will succeed retiring Chief Executive Jim Skinner in July.
McDonald's rival Yum Brands Inc (YUM.N), parent of the KFC, Pizza Hut and Taco Bell chains, on Thursday said recent results in Europe were marked by choppiness and "some weakness.
McDonald's, the world's biggest hamburger chain, expects its momentum to continue in April, and forecast a 4 percent rise in global same-restaurant sales for the month.
First-quarter net income rose almost 5 percent to $1.27 billion, or $1.23 per share, in line with analysts' average forecast, according to Thomson Reuters I/B/E/S.
"If it weren't for higher food cost, the numbers in terms of earnings growth would have been better," Edward Jones analyst Jack Russo said.
Revenue jumped 7 percent to $6.55 billion.
In Asia/Pacific, Middle East and Africa (APMEA), first-quarter same-restaurant sales were up 5.5 percent, slightly less than the 5.9 percent analysts expected, due to lower franchise margins.
Shares in McDonald's rose to $97.26 in midday trading on the New York Stock Exchange, where they have gained more than 20 percent over the last 12 months.
(Reporting By Brad Dorfman in Chicago and Lisa Baertlein in Los Angeles and Phil Wahba in New York; Editing by Gerald E. McCormick, John Wallace, Dave Zimmerman, Phil Berlowitz)