Why McDonald's (MCD) Is Down Today

NEW YORK (TheStreet) -- McDonald's  (MCD) was falling 1.09% to $94.87 on Monday after the world's biggest restaurant chain by revenue reported a sharper-than-expected decline in U.S. same-restaurant sales. 

Comparable sales in stores open at least 13 months fell 3.3% in the United States in January, a steeper drop than the 1.6% decline expected by analysts. The company noted the frigid weather that hit much of the U.S. last month contributed to the decline. Worldwide sales, though, rose 1.2%, beating analysts' estimates of a 0.7% increase.

In Europe, which barely tops the U.S. as McDonald's largest revenue market, sales rose 2%, which surpassed analysts' expectations of 1.3%. Sales rose 5.4% in the Asia Pacific, Middle East and Africa region, beating analysts' expectations of a 2% rise.

"Throughout the McDonald's system we are committed to elevating the customer experience and enhancing our customers' relationship with our brand," said President and CEO Don Thompson in a company statement. "We are intent on improving our performance by building on our customer-driven strategies and the fundamental strengths of our proven business model."

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TheStreet Ratings team rates MCDONALD'S CORP as a "buy" with a ratings score of A. TheStreet Ratings Team has this to say about its 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, increase in net income and expanding profit margins. 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 3.8%. Since the same quarter one year prior, revenues slightly increased by 2.0%. 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 ($5.85 versus $5.56).
  • The net income growth from the same quarter one year ago has exceeded that of the Hotels, Restaurants & Leisure industry average, but is less than that of the S&P 500. The net income increased by 0.1% when compared to the same quarter one year prior, going from $1,396.10 million to $1,397.00 million.
  • 38.67% 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 19.69% compares favorably to the industry average.
  • In its most recent trading session, MCD has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
  • You can view the full analysis from the report here: MCD Ratings Report

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