Give McDonald's New Internal Activist CEO A Chance

In a recent report, analysts at Barclays called on investors to give new McDonald's Corporation MCD CEO Stephen Easterbrook a fair chance to turn the ailing company around.

Analysts point out that Easterbrook, who has proclaimed himself a "constructive agitator" and an "internal activist," will need some time to prove himself a capable leader.

What Is The Best Turnaround Approach?

The company's new internally-promoted CEO inherits a company suffering from negative trends at 36,000 global restaurants. Analysts believe the company should take one of two turnaround approaches:

1. Simplify the current menu

Or

2. Overhaul the menu to include more customized and/or premium offerings

Analysts feel that simplification is the more likely approach.

Resilient Stock

McDonald's endured some tough global results in 2014, but analysts point out that the stock was surprisingly resilient, only losing about 4 percent on the year.

McDonald's stock has been supported by the fact that it has the lowest valuation and the highest dividend yield of all the names in the fast food space.

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Near-Term Support

Analysts see several ways that management can provide a lift for share prices in the short-term. According to the report, McDonald's biggest short-term opportunities come from adjusting operations to free up capital that can be returned to shareholders.

Analysts believe that the 2014 capital return plan, which called for up to $20 billion in dividend payments and share buybacks through 2016, can be boosted by up to $10 billion by taking advantage of re-franchising opportunities, increasing leverage (possibly at the expense of the company's ‘A’ rating) and cutting costs by $250 million.

Barclays has an Overweight rating on McDonald's and a $105 target on the stock.