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Strong Dollar Eats into McDonald’s 4Q15 Revenue

Lovin' It: McDonald's Posted Strong 4Q15 Earnings

(Continued from Prior Part)

Business segments

Based on the characteristics and growth opportunities of the markets, in July 2015, McDonald’s (MCD) reorganized its business into four segments—US, international lead markets, high growth markets, and foundational markets and corporate. Most of the sales were derived from the US and international lead markets.

McDonald’s 4Q15 revenue

The strong US dollar, compared to most of the other currencies, was a headwind for companies in the US with international operations. More than 65% of McDonald’s revenue comes from the international market. It reported a fall of 3.5% in its 4Q15 revenue—compared to its 4Q14 revenue. However, its revenue of $6.3 billion was more than analysts’ expectations of $6.2 billion.

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US segment

The company adopted a turnaround strategy in 3Q15. It set a positive tone for 4Q15. The segment recorded revenue of $2.2 billion—growth of 3.3%—from its 4Q14 revenue. Although McDonald’s operated fewer company-owned restaurants than in 4Q15, the rise in same-store sales growth increased the revenue from this segment.

International segments

Although the international lead markets segment recorded same-store sales growth of 3.4%, the revenue generated from the segment fell by 9%. In this segment, the strengthening US dollar against other major currencies caused the revenue to decline.

The strengthening US dollar also led to the fall in the revenue recorded by high-growth markets as well as the foundational markets and corporate segment. In 4Q15, the high-growth markets recorded revenue of $1.46 billion—compared to $1.54 billion in 4Q14. It fell by 5%. The foundational markets and corporate segment recorded revenue of $750 million in 4Q15—compared to $794 million in 4Q14. It fell by 6%.

You can gain exposure to McDonald’s by investing in ETFs like the iShares U.S. Consumer Services ETF (IYC). IYC invested more than 4% of its portfolio in McDonald’s. It also has holdings in Starbucks (SBUX), Yum! Brands (YUM), and Chipotle Mexican Grill (CMG).

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