McDonald’s (MCD) Stock Upgraded Today at RBC Capital

McDonald’s (MCD) stock and price target were raised at RBC Capital this morning.
By Amanda Schiavo ,

NEW YORK (TheStreet) -- McDonald's Corp. (MCD) - Get Report was upgraded to "outperform" from "sector perform" by an analyst at RBC Capital Markets on Wednesday morning.

The firm said it raised its rating on the fast food chain based on its expectations that the Big Mac maker's same-store-sales trends will turn positive in 2015 and continue to grow into next year.

Shares of McDonald's are lower by 0.18% to $99.56 at the start of trading this morning.

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RBC Capital raised its price target on McDonald's stock to $115 from its previous $93 price target.

The firm said it believes McDonald's sales will increase based in part on an improvement in its U.S. business, MarketWatch reports, adding that RBC Capital feels the stock is being valued at a "significant discount" to its peers.

McDonald's quick service restaurants can be found in over 100 countries across the globe.

Separately, TheStreet Ratings team rates MCDONALD'S CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate MCDONALD'S CORP (MCD) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, MCDONALD'S CORP has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • 43.85% 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 16.69% compares favorably to the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 7.7%. Since the same quarter one year prior, revenues slightly dropped by 7.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • Even though the current debt-to-equity ratio is 1.17, it is still below the industry average, suggesting that this level of debt is acceptable within the Hotels, Restaurants & Leisure industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.20 is sturdy.
  • MCDONALD'S CORP's earnings per share declined by 19.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, MCDONALD'S CORP reported lower earnings of $4.83 versus $5.56 in the prior year. This year, the market expects an improvement in earnings ($5.05 versus $4.83).
  • You can view the full analysis from the report here: MCD Ratings Report
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