UPDATE: Morgan Stanley Downgrades McDonald's Corporation
John Glass of Morgan Stanley downgraded shares of McDonald's Corporation (NYSE: MCD) to Equal-weight from Overweight with a price target lowered to $96 from a previous $102.
"While we see a theoretical financial restructuring, weakening fundamentals, punctuated by a sharp market share loss in the U.S., and idiosyncratic international pressures continue to weigh on EPS estimates," Glass wrote in a note to clients on Monday.
On January 9, Glass demonstrated "optimism" over shares over the fast-food giant's structural advantages, low expectations and opportunity for "self help measures." Since then, U.S. fundamentals have "deteriorated more than expected" while international operations demonstrated "stiff exogenous headwinds."
McDonald's could restructure itself through more aggressive re-franchising, lower G&A expenses and lower capital expenditures. However, Glass notes that more influence from shareholders would be required for the company's management team to begin a restructuring program.
Even if McDonald's initiates a restructuring program, "moving the needle materially on earnings and therefore the stock would take a lot."
Throughout 2015, Glass lowered his 2015 estimates 6.5 percent; shares of McDonald's have declined by 2.5 percent over the same time period. The analyst said that shares of McDonald's do come with a 3.6 percent dividend yield, which provides a certain downside safety net.
Latest Ratings for MCD
Oct 2014 | Morgan Stanley | Downgrades | Overweight | Equal-weight |
Sep 2014 | Citigroup | Maintains | Neutral | |
Sep 2014 | Bank of America | Reiterates | Buy |
View More Analyst Ratings for MCD
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