The firm said it initiated coverage on the famed fast food restaurant chain as it believes McDonald's appointing a new CEO and making changes to the company's organization structure are moves geared toward revising the company's fortunes following another year of lackluster EPS and stock performances.
"The willingness to question once off limits strategies and sacrifice 'sacred cows' philosophies while investing in menu and technology may begin to drive results in the not-too-distant future," Deutsche Bank said in an analyst note.
"Despite healthy investor skepticism on whether MCD's 'arches are broken', MCD remains an iconic global and fixable brand, in our opinion, with a sizeable real estate portfolio," the firm continued.
Shares of McDonald's are up by 0.64% to $97.10 in pre-market trading on Thursday morning.
Seprately, 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 a number of 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 and expanding profit margins. We feel its 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:
- 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. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, MCDONALD'S CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- 43.42% 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 7.5%. 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.
- Net operating cash flow has decreased to $1,699.50 million or 10.89% when compared to the same quarter last year. Despite a decrease in cash flow of 10.89%, MCDONALD'S CORP is in line with the industry average cash flow growth rate of -11.49%.
- You can view the full analysis from the report here: MCD Ratings Report