McDonald's Extends Losses As Analysts Slash Ratings
McDonald's (NYSE: MCD) was trending lower Wednesday after at least four analysts downgraded the stock on weak outlook and disappointing second-quarter results.
"The company has been losing market share and new products have been lackluster," Sterne Agee's Lynne Collier said in a note that cut McDonald's from Buy to Neutral.
U.S. same-store sales fell 3.5 percent in June, versus expectations of a 0.1 percent increase. The measure fell by the same amount in Europe and by two percent in Asia.
Collier sees no catalysts to reverse the trend and expects shares to be "range bound" in the "intermediate term." Collier cut a third-quarter earnings estimate to $1.59 from $1.62 per share. The Wall Street consensus calls for $1.61 per share.
Others downgrading the shares Wednesday to Neutral or Equal Weight included Baird, Stephens & Co. and Susquehanna.
Deutsche Bank's Jason West maintained a Buy rating on McDonald's, but acknowledged nonetheless that "it's increasingly difficult to find a silver lining in McDonald's financials."
Yet West said dividend payments make the stock "an attractive bond proxy" with a yield of 3.4 percent. Moreover, he views the shares as inexpensive with a potential for appreciation should the company's performance improve.
But "the timing of any turnaround continues to get pushed out as management struggles," West said, cutting his target to $105 from $115.
Barclays' Jeffrey A. Bernstein maintained an Overweight rating, but called McDonald's near-term outlook "uninspiring."
Bernstein cut his target from $101 to $108 per share and sees sales growth getting deferred until 2015.
At UBS, analyst Keith Siegner maintained a Buy and thinks patience will pay off.
"But it's a good thing McDonald's wait times don't last this long," Siegner said, cutting his target to $115 from $120.
In pre-market trading, McDonald's was down about one percent to $95.33.
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