Deutsche Bank Makes McDonald's A Top Pick

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In a report published Thursday, Deutsche Bank analyst Karen Short initiated coverage of
McDonald's CorporationMCD
with a Buy rating and a price target of $120, saying "the "arches" are tarnished, but can shine again." In the report Deutsche Bank noted, "A new CEO and organization structure/ownership mix changes are among moves aimed at reversing MCD's fortunes after another year of lackluster EPS and stock performances. The willingness to question once off limits strategies and sacrifice "sacred cows" philosophies while investing in menu and technology may begin to drive results in the not-too-distant future." Although investors are contemplating whether the company's "arches are broken," McDonald's continues to be an "iconic global and fixable brand," Short commented. He added further that the share price does not seem to reflect any potential upside from the company's strategic turnaround. McDonald's is reducing its owned stores, and its franchise mix is moving towards 90 percent. Short believes this is a "first step in creating a more asset light model," which should boost the capital returned to shareholders. McDonald's continues to focus on returning cash to shareholders, and is expected to hit the high end of its plan of about $18-$20 billion for 2014-2016.
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Posted In: Analyst ColorInitiationAnalyst RatingsConsumer DiscretionaryDeutsche BankRestaurants
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