McDonald's reported a 2.2% drop in comparable store sales in November, bigger than the 1.7% drop that analysts' expected. Comparable store sales fell 4.6% in the U.S., 2% in Europe, and 4% Asia Pacific, Middle East, and Africa (APMEA). The sales decline isthe company's worst in more than a decade, according to Bloomberg.
The company said it saw strong sales in its Other Countries & Corporate segment, which includes Canada and Latin American countries, which helped pull up comparable store sales.
McDonald's warned that the weak sales, a supplier issue in China, and the strength of the U.S. dollar against foreign currencies may negatively impact its fourth quarter results. The company expects the Chinese supplier issue to have an impact of 7 cents to 10 cents on its quarterly results, and the strong U.S. dollar to have a negative impact of 7 cents to 9 cents for the quarter.
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