Will McDonald's (MCD) Stock Fall on $235 Million Charge?

McDonald's (MCD) will take a $235 million charge in the second quarter tied to its refranchising plan.
By Rachel Graf ,

NEW YORK (TheStreet) -- McDonald's (MCD) - Get Report said it would take a $235 million charge in the 2016 second quarter related to its proposed sale of 4,000 restaurants to franchisees by 2018.

The charge will negatively impact June-quarter earnings by 20 cents per share, according to a company statement.

The fast-good giant is targeting $500 million in general and administrative savings, most of which is to be realized by the end of 2017.

McDonald's previously announced that 93% of its locations would be owned by franchisees after the sales, with the ultimate goal of becoming 95% franchised.

Wall Street typically likes the shift toward franchised locations because it gives companies more stable cash flow from royalties, licensing and property leases and they often have higher profit margin while avoiding the volatility of labor and commodity costs, the Wall Street Journal reports. 

McDonald's stock is up 0.07% to $121 in pre-market trading on Friday.

Separately, TheStreet Ratings team rates the stock as a "buy" with a ratings score of B.

McDonald's strengths such as its solid stock price performance, increase in net income, notable return on equity, expanding profit margins and good cash flow from operations. We feel 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 article's author. 

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