NEW YORK (TheStreet) -- Shares of McDonald's Corp. (MCD) are down 2.76% to $93.65 in pre-market trade after the company announced that global comparable sales decreased 2.2% in November. Performance by segment was as follows: U.S. down 4.6%, Europe down 2.0%, and Asia/Pacific, Middle East and Africa (APMEA) down 4.0%.
"Today's consumers increasingly demand more choice, convenience and value in their dining-out experience," said McDonald's President and CEO Don Thompson. "We are working to bring the McDonald's Experience of the Future to life for our customers to better deliver against these evolving expectations. Each of our geographic segments is focused on regaining business momentum by prioritizing initiatives to improve comparable sales performance in the near-term, while developing innovations to deliver sustained profitable growth through McDonald's Experience of the Future."
The company said strong comparable sales in McDonald's Other Countries & Corporate segment, which includes Latin America and Canada, contributed positively to the company's global comparable sales performance for the month.
McDonald's said in a statement that the following items are expected to negatively impact fourth quarter results: Negative top-line performance is expected to significantly pressure company-operated and franchised margins, 7 cents to 10 cents per share due to the ongoing impact of the supplier issue in China, as previously communicated, and 7 cents to nine cents per share due to strengthening of the U.S. dollar against nearly all foreign currencies.
Systemwide sales for the month decreased 6%, or were relatively flat in constant currencies.
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 multiple 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 and largely solid financial position with reasonable debt levels by most measures. 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.
- 44.29% 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 15.29% compares favorably to the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. 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 1.11, 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 1.07 is sturdy.
- MCDONALD'S CORP's earnings per share declined by 28.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, MCDONALD'S CORP increased its bottom line by earning $5.56 versus $5.36 in the prior year. For the next year, the market is expecting a contraction of 10.7% in earnings ($4.96 versus $5.56).
- You can view the full analysis from the report here: MCD Ratings Report