By Lisa Baertlein
LOS ANGELES (Reuters) - As U.S. consumers visit fewer restaurants in a weak economy, McDonald's Corp
The world's largest hamburger chain posted a profit that beat Wall Street estimates on Wednesday, saying it was optimistic about the rest of the year and describing its business as recession proof.
But concerns of a protracted credit crunch limited gains in its shares and hit the fast-food sector as a whole. Rival Burger King Holdings Inc
"As we enter the final quarter of the year, October sales trends remain strong and I am optimistic about McDonald's outlook," said McDonald's Chief Executive Jim Skinner.
"We continue to be recession resistant," Skinner said on a conference call with analysts. McDonald's grew its market share and its franchisees are still able to get financing, he said.
Matthew Kaufler, portfolio manager at Touchstone Value Opportunities, was heartened by the results.
"No company is going to outrun a recession. Maybe we're seeing a little gravitational pull downward on McDonald's, but relative to their peers they're doing phenomenally well," he said.
McDonald's shares rose 35 cents to $55.48. Burger King fell 1.4 percent to $19.90 and Yum Brands Inc
BIG MACS AND CHICKEN
U.S. consumers, grappling with lower home values, job losses, a credit crunch and higher gas prices have cut back on eating out at mid-tier restaurant chains, and in many cases, have switched to lower-priced chains.
That has generally helped fast-food operators like McDonald's, Yum -- parent of Taco Bell, Pizza Hut and KFC -- and Burger King, but hurt mid-tier players like P.F. Chang's China Bistro Inc
"People who can't afford to go to (mid-priced restaurants) but still want to go out -- we've benefited from that," Burger King CEO John Chidsey told Reuters in an interview in Taiwan. "The question is if things get worse, do people decide at some point they should just stay at home?" [ID:nSP383533]
P.F. Chang's on Wednesday reported a smaller-than-expected decline in third-quarter profit on cost controls and said it would close 10 underperforming stores -- sending shares up more than 7 percent.
McDonald's profit rose to $1.19 billion, or $1.05 per share, from $1.07 billion, or 89 cents per share, a year earlier. Analysts on average were expecting 98 cents per share, according to Reuters Estimates.
Total revenue rose 6 percent to $6.27 billion, helped by a 7.1 percent increase in global same-store sales.
Domestic same-store sales, or sales at restaurants open at least 13 months, rose 4.7 percent, their highest increase this year, helped by well-known menu items including the Big Mac, as well as new Southern-style chicken sandwiches and lower-priced drinks.
RBC Capital Markets analyst Larry Miller said in a client note that McDonald's worldwide September same-restaurant sales were up 4.5 percent, below analysts' call for a rise of 5.0 percent and his call for a sales increase of 5.5 percent, as U.S. and European sales missed his targets for the month.
"The company noted October trends remain 'strong,' but we're unsure of the exact magnitude," Miller said.
P.F. Chang's, which operates the Pei Wei Asian Diner chain in addition to its namesake restaurants, cut its 2008 earnings per share view to $1.34 to $1.40 on revenue growth of 11 to 12 percent.
Its prior forecast called for EPS of $1.36 to $1.42 per share on revenue growth of 12 to 13 percent.
The Asian-themed restaurant chain said third-quarter net income fell to $3.0 million, or 12 cents per share, from $5.3 million, or 20 cents per share, a year earlier.
Before items, the company earned 31 cents per share, handily topping analysts' average estimate of 25 cents.
(Additional reporting by Martinne Geller in New York and Doug Young in Taipei; editing by Gerald E. McCormick, Dave Zimmerman)
