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TheStreet Open House

Why McDonald's (MCD) Is Up Today

NEW YORK (TheStreet) -- McDonald's  (MCD) was rising 3.4% to $98.44 at 11:11 a.m. on Tuesday after CFO Pete Bensen spoke at the Bank of America/Merrill Lynch 2014 Consumer & Retail Conference and explained at length that the world's largest restaurant chain by revenue could fix its decline in comparable-store sales in February.

McDonald's reported a greater-than-expected drop in global comparable-store sales for February, thanks in part to slow U.S. business. McDonald's noted worldwide sales at restaurants open at least 13 months fell 0.3% for the month, which was worse than analysts' average estimate of a 0.1% decline, according to Reuters. Same-restaurant sales in the U.S. fell 1.4%, worse than analysts' estimate of a 0.6% decline.

Despite this news, McDonald's climbed to its highest price since Nov. 2013 after Bensen's remarks, in which he said the company would stabilize its performance in the U.S., Japan and Germany in 2014 and noted McDonald's growth in several emerging markets. Furthermore, McDonald's plans to return $5 billion to its shareholders this year.

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TheStreet Ratings team rates MCDONALD'S CORP as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate MCDONALD'S CORP (MCD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, growth in earnings per share, increase in net income and expanding profit margins. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MCD's revenue growth has slightly outpaced the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 2.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has slightly increased to $1,873.50 million or 1.26% when compared to the same quarter last year. In addition, MCDONALD'S CORP has also vastly surpassed the industry average cash flow growth rate of -51.97%.
  • MCDONALD'S CORP's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MCDONALD'S CORP increased its bottom line by earning $5.56 versus $5.36 in the prior year. This year, the market expects an improvement in earnings ($5.85 versus $5.56).
  • The net income growth from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 0.1% when compared to the same quarter one year prior, going from $1,396.10 million to $1,397.00 million.
  • 44.43% is the gross profit margin for MCDONALD'S CORP which we consider to be strong. Regardless of MCD's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MCD's net profit margin of 19.69% compares favorably to the industry average.
  • You can view the full analysis from the report here: MCD Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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