The company reported on Friday that July same-store sales in its Asia Pacific, Middle East and African markets fell 7.3%. Wall Street was looking for a decline of 0.2%. The region accounts for about 10% of McDonald's global sales.
The company also reported that same-store sales in the U.S. declined 3.2% during the month. Unless these figures rebound dramatically, McDonald's will likely post a drop in revenue this year for the first time in more than a decade.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff. 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, growth in earnings per share, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and notable return on equity. 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 5.8%. Since the same quarter one year prior, revenues slightly increased by 1.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 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 ($5.63 versus $5.56).
- 44.52% 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 19.31% compares favorably to the industry average.
- MCD's debt-to-equity ratio of 0.96 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.46 is sturdy.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MCDONALD'S CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: MCD Ratings Report