McDonald's (MCD) Still Outpacing Rivals, Analysts Explain on CNBC
NEW YORK (TheStreet) -- RBC Capital Markets' David Palmer and Barclays' Jeffrey Bernstein discussed McDonald's (MCD) - Get Report relatively mixed 2016 second quarter report on CNBC's "Squawk on the Street" Tuesday.
Before today's opening bell, McDonald's reported that second quarter same-store sales rose by 1.8% year over year, missing Wall Street estimates of a 3.2% growth. The fast food giant posted adjusted earnings of $1.45 per share on revenue of $6.26 billion, compared to analysts' expectations for earnings of $1.38 a share on $6.27 billion in revenue, according to Thomson Reuters.
Palmer thinks McDonald's is outpacing its rivals by about 50 basis points.
"It's really not doing it with too much value. They have the two for five (deal), that's doing something on check but it's not doing much on traffic," Palmer noted.
McDonald's needs to figure out how to "stabilize" its traffic.
"They're making a lot of money at the restaurant level. Their margins were better than expected but clearly traffic is going to have to be a priority from here," Palmer said, adding that management should work on renovations and work out a value platform aside from all-day breakfast.
On a "relative basis," the fast food sector "slowed from its peaks," Bernstein stated.
"But I think most would still look at the restaurant category and see quick-service outpacing the rest of the industry so now it's just a broader macro question," he explained.
McDonald's is "clearly not immune" to the headwinds that the entire restaurant industry is dealing with, Bernstein continued.
"But as long as McDonald's is not losing share," continued initiatives such as all-day breakfast and the company's planned push to digital offerings will keep it outpacing its competitors, he added.
Shares of McDonald's are falling by 4.47% to $121.70 late this morning.
Separately, TheStreet Ratings rated McDonald's as a "buy" with a score of B.
The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, notable return on equity, expanding profit margins and good cash flow from operations. TheStreet Ratings feels its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
You can view the full analysis from the report here: MCD
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.