Market Overview

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

Share:
McDonald's Earnings: Stephens Analyst Sees 'Significant' Improvement Next Year
Related MCD
An Appetizing Restaurant Stock For Value Investors
There Have Been Some Notable Cybersecurity Breaches In 2017 (And It's Only March)
Weekly Top Insider Buys Highlight for the Week of March —4 (GuruFocus)

Stephens analyst Will Slabaugh released a report on Thursday morning explaining his take on the mixed earnings report released by McDonald’s Corporation (NYSE: 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.

Latest Ratings for MCD

DateFirmActionFromTo
Jan 2017UBSDowngradesBuyNeutral
Dec 2016NomuraUpgradesNeutralBuy
Dec 2016GuggenheimDowngradesBuyNeutral

View More Analyst Ratings for MCD
View the Latest Analyst Ratings

Posted-In: Stephens Will SlabaughAnalyst Color Reiteration Restaurants Analyst Ratings General Best of Benzinga

 

Related Articles (MCD)

View Comments and Join the Discussion!