McDonald's Earnings: Stephens Analyst Sees 'Significant' Improvement Next Year

Stephens analyst Will Slabaugh released a report on Thursday morning explaining his take on the mixed earnings report released by McDonald’s Corporation MCD. The struggling fast food giant has been looking to get back on track in recent months, and Slabaugh discusses the positive and negate takeaways from McDonald’s earnings.

The Numbers

McDonald’s earnings per share of $1.26 and revenue of $6.498 billion beat Wall Street consensus estimates of $1.24 and $6.428 billion, respectively. However, the company reported global same-store sales growth of -0.7 percent, worse than consensus expectations of -0.6 percent.

See Also: McDonald's Top Q2 Earnings Views

Positives

According to Slabaugh, the biggest positive takeaway from the earnings report was management’s commentary indicating that the company is on track for positive global comps in Q3. In addition, Slabaugh was impressed by the cost-cutting measures that McDonald’s implemented that provided the slight beat on EPS.

Negatives

The biggest disappointment from McDonald’s numbers was the company’s big miss on both global and U.S. same-store sales. Management also conceded that recent promotions have fallen short of internal expectations, which casts doubt on the company’s long-term plans for a turnaround.

Outlook

Slabaugh was particularly disappointed with the lackluster U.S. same-store sales numbers for the month of June. However, Stephens remains patient with McDonald’s turnaround efforts for now.

“Despite the relatively ugly 2Q, we believe there is significant room for earnings and sentiment improvement as the business likely improves in 2H and 2016,” Slabaugh wrote.

While the S&P 500 has surged more than 6.6 percent in the past year, McDonald’s stock has lagged, returning just 1.7 percent. Stephens maintains its Overweight rating on McDonald’s and has a $115 target for the stock.