Restaurant Wrap: McDonalds (MCD), Chipotle (CMG), Burger King (BKW)

NEW YORK (TheStreet) -- McDonald's (MCD) is formulating a loyalty program to attract a younger crowd and increase customer retention. The program, in its beta stage, will be limited to 570 stores before a nationwide roll-out is considered.

McDonald's is currently testing a mobile payment app and already offers a reloadable branded gift card.

Cafe-style Starbucks (SBUX) and Panera Bread (PNRA) have introduced similar loyalty programs to much success. McDonald's will be the first fast-food restaurant to do so.

McDonald's shares are 1.3% lower to $94.88, as of 12:30 p.m. EST.

TheStreet Ratings team rates McDonald's as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate McDonald's (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, increase in stock price during the past year, good cash flow from operations and expanding profit margins. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results." Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 4.4%. Since the same quarter one year prior, revenues slightly increased by 2.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • McDonald'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 increased its bottom line by earning $5.36 vs. $5.28 in the prior year. This year, the market expects an improvement in earnings ($5.60 vs. $5.36).
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Net operating cash flow has slightly increased to $1,509.8 million or 1.8% when compared to the same quarter last year. Despite an increase in cash flow, McDonald's Corp's average is still marginally south of the industry average growth rate of 6.92%.
  • 44.55% is the gross profit margin for McDonald's 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 19.71% compares favorably to the industry average.

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