McDonald’s (MCD) Stock Closed Higher on Plan to Drive Burger Sales

NEW YORK (TheStreet) -- Shares of McDonald's (MCD) finished the day in the green, up by 1.57% to $97.30 at the end of trading on Friday, following reports that the fast food restaurant chain is making some changes to one of its classic hamburger products, the quarter-pounder, in order to help drive sales.

The McDonald's quarter-pounder patty will now weigh 4.25 ounces, as compared to its previous 4 ounces prior to cooking, the burger shrinks to 2.8 ounces after cooking.

The patty will also have a new shape, an internal document from McDonald's viewed by CNBC.com said.

The restaurant company is said to begin selling the altered burgers next month.

The quarter-pounder update "improves the taste, texture and appearance of the burgers," the document said, CNBC.com added. The "patties [will] retain more moisture resulting in a juicier and more flavorful burger," the document noted.

McDonald's is changing one of its signature offerings as it looks to strengthen its core burger platform and increase sales as it faces strong competition from brands such as Sonic (SONC) and Shake Shack (SHAK).

"As (CEO) Steve Easterbrook has shared, we're always innovating around McDonald's food, drinks and restaurant experience based on customers' preferences, and that includes hotter food and reviewing cooking procedures, and we'll share more details soon," McDonalds told CNBC.com.

Separately, 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 few notable 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 7.4%. 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.
  • The share price of MCDONALD'S CORP has not done very well: it is down 5.12% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. 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 -11.65%.
  • You can view the full analysis from the report here: MCD Ratings Report

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