NEW YORK (TheStreet) -- McDonald's (MCD) shares are down 1.23% to $96.61 in trading on Monday following the unveiling of the fast food restaurant's restructuring plan that is designed to improve the company's diminishing sales.
However, investors and critics alike seem to have rejected new CEO Steve Easterbrook's plan to transform the company into a more efficient and modern company. Easterbrook said that the company plans to produce $300 million in annual savings by 2017 in a video announcing the plan today.
"The immediate priority for our business is restoring growth under a new organizational structure and ownership mix designed to provide greater focus on the customer, improve our operating fundamentals and drive a recommitment to running great restaurants. As we turn around our business, we will look to create more excitement around the brand and ensure that we build on our rich heritage of positively impacting the communities we serve," said Easterbrook.
The company also announced plans to refranchise 3,500 restaurants by 2018, increasing its global franchise percentage to 90% from 81%, while the company also plans to return between $8 billion and $9 billion to shareholders this year.
Standard & Poor's downgraded the company's credit rating to A- from A in response to the potential $9 billion cash return the company has planned for this year.
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 several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 36.94% 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 13.61% compares favorably to the industry average.
- MCD, with its decline in revenue, slightly underperformed the industry average of 7.0%. Since the same quarter one year prior, revenues fell by 11.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- 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.
- MCDONALD'S CORP's earnings per share declined by 30.6% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, MCDONALD'S CORP reported lower earnings of $4.83 versus $5.56 in the prior year. For the next year, the market is expecting a contraction of 0.9% in earnings ($4.79 versus $4.83).
- The company, on the basis of change in net income from the same quarter one year ago, has underperformed when compared to that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income has significantly decreased by 32.6% when compared to the same quarter one year ago, falling from $1,204.80 million to $811.50 million.
- You can view the full analysis from the report here: MCD Ratings Report