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April 19, 2015

NYSE: MCD

MCDONALD'S CORP
BUY
A+

A-

HOLD

B+

Annual Dividend Rate


$3.40

B-

C+

Annual Dividend Yield


3.55%

SELL
C-

D+

Beta
0.36

Sector: Consumer Goods & Svcs


MCD BUSINESS DESCRIPTION
McDonald's Corporation operates and franchises
McDonald's restaurants in the United States,
Europe, the Asia/Pacific, the Middle East, Africa,
Canada, and Latin America. The company's
restaurants offer various food products, soft drinks,
coffee, and other beverages.

Weekly Price: (US$)

D-

E+

E-

Market Capitalization
$91.7 Billion
Sub-Industry: Restaurants
SMA (50)

BUY
52-Week Range
$87.62-$103.78

RATING SINCE
TARGET PRICE

04/23/2008
$110.45

Price as of 4/16/2015
$95.63

Source: S&P

SMA (100)

1 Year

2 Years
113
110

TARGET
TARGET
TARGETPRICE
PRICE
PRICE$110.45
$110.45
$110.45
TARGET

108
105
103
100

STOCK PERFORMANCE (%)


3 Mo.
Price Change
4.52

98
1 Yr.
-5.16

3 Yr (Ann)
-0.33

12 Mo.
-2.37
-14.83
-13.13

3 Yr CAGR
0.53
-4.74
-2.93

95
93

GROWTH (%)

90
Last Qtr
-7.35
-21.44
-19.29

Revenues
Net Income
EPS

RETURN ON EQUITY (%)


MCD
Q4 2014
37.01
Q4 2013
34.89
Q4 2012
35.73

Ind Avg
37.95
21.37
27.03

S&P 500
14.20
14.48
13.11

19.80

33.48

20.57

MCD

Ind Avg

S&P 500

75
50
25

2013

2014

2015

COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History

2013

Q4 1.13

Q3 1.09

Q2 1.40

Q1 1.21

Q4 1.40

Q3 1.52

Q2 1.38

43.85% 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 16.69% compares favorably to the industry
average.

Q1 1.26

Q4 1.38

Q3 1.43

Q2 1.32

Volume in Millions

HIGHLIGHTS
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.

EPS ANALYSIS ($)

Q1 1.23

BUY

RECOMMENDATION
We rate MCDONALD'S CORP (MCD) a BUY. This is based on the convergence of positive investment
measures, which should help this stock outperform the majority of stocks that we rate. 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.

P/E COMPARISON

2012

88
Rating History

2014

NA = not available NM = not meaningful


1 Compustat fiscal year convention is used for all fundamental
data items.

Regardless of the drop in revenue, the company managed to outperform against the industry average of 8.2%.
Since the same quarter one year prior, revenues slightly dropped by 7.3%. 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 1.17, 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 1.20 is sturdy.
MCDONALD'S CORP's earnings per share declined by 19.3% in the most recent quarter compared to the same
quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two
years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year,
MCDONALD'S CORP reported lower earnings of $4.83 versus $5.56 in the prior year. This year, the market
expects an improvement in earnings ($4.90 versus $4.83).

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: April 19, 2015

PAGE 1

April 19, 2015


NYSE: MCD

MCDONALD'S CORP
Sector: Consumer Goods & Svcs Restaurants Source: S&P
Annual Dividend Rate
$3.40

Annual Dividend Yield


3.55%

PEER GROUP ANALYSIS

30%

CMG
V
FA
AB
OR
LE

QSR

YUM

DNKN

MCD

R
VO
FA
LE
AB

-20%

UN

Revenue Growth (TTM)

DRI
ARMK

SBUX

PNRA

5%

WEN

55%

EBITDA Margin (TTM)


Companies with higher EBITDA margins and
revenue growth rates are outperforming companies
with lower EBITDA margins and revenue growth
rates. Companies for this scatter plot have a market
capitalization between $3.9 Billion and $91.7 Billion.
Companies with NA or NM values do not appear.
*EBITDA Earnings Before Interest, Taxes, Depreciation and
Amortization.

REVENUE GROWTH AND EARNINGS YIELD


30%

Market Capitalization
$91.7 Billion

52-Week Range
$87.62-$103.78

Price as of 4/16/2015
$95.63

INDUSTRY ANALYSIS
The hotels, restaurant, and leisure industry consists of hotels, restaurants, casinos, cruise lines, resorts, and
theme parks. Demand is driven by a fairly consistent group of factors throughout the whole of the industry:
personal income levels, total employment, and consumer confidence. In recent years, catastrophic weather,
fear of terrorism, and health epidemics directly impacted the industry in a material way. The industry is
capital, marketing, personnel, energy, maintenance, and technology intensive. Major players include
Intercontinental Hotels Group (IHG), Marriott International Inc. (MAR), Las Vegas Sands (LVS), MGM Resorts
International (MGM), McDonalds (MCD), and Yum! Brands (YUM).

REVENUE GROWTH AND EBITDA MARGIN*

DPZ

Beta
0.36

CMG

The foodservice industry employs more than 12 million people, making it Americas second largest employer
after the U.S. government. Not only is the industry huge, its growing, as factors - such as a rise in
two-income households - have been leading to increasing levels of dining out. In recent years, restaurant
sales have risen roughly 5% annually according to National Restaurant Association estimates. However,
despite its growth rate, the industry should be seen as mature. Companies within the industry generally earn
thin margins and face stiff competition. As a result, M&A activity is frequent as competitors look to spread
fixed costs across more locations.
Both tourism and business travel remain vital to the industry, and as a result, U.S. GDP growth, consumer
confidence, and corporate earnings remain vital to the industrys success. The expansion in capital spending
has been in response to projected demand. However, overdevelopment in certain areas is a concern. Looking
forward, any prolonged low occupancy rates could threaten hotels that are heavily leveraged. As for metrics,
occupancy, average daily room rate, and revenue per available room should be considered when analyzing
the industry or a player within the industry.
Casinos generate roughly $68 billion in revenues annually, and typically, 50% of a casino hotels revenues
come from gaming, 20% from hotel rooms, 15% from food and beverages, and 15% from retail stores, shows,
and other entertainment offerings. Expansion and consolidation have been recent trends of note. In 2005
alone, MGM Resorts International purchased Mandalay Resort Group for close to $8 billion and Harrahs
bought Caesars for over $9 billion. Recent years have also seen a good amount of new casino construction in
the $700 million range as competitors jockey to attract visitors by providing more elaborate offerings. Looking
ahead, further capacity expansion may threaten margins. Meanwhile, most of the industrys top-line growth
has come from Native American casinos, which at present generate roughly $16 billion in revenues annually.

V
FA
AB
OR

PEER GROUP: Hotels, Restaurants & Leisure

LE

SBUX

DPZ
DRI

PNRA
DNKN
ARMK
YUM

MCD

R
VO
FA
LE
AB

-20%

UN

Revenue Growth (TTM)

QSR

-4%

WEN

6%

Earnings Yield (TTM)


Companies that exhibit both a high earnings yield
and high revenue growth are generally more
attractive than companies with low revenue growth
and low earnings yield. Companies for this scatter
plot have revenue growth rates between -17.1% and
27.8%. Companies with NA or NM values do not
appear.

Ticker
MCD
DRI
ARMK
SBUX
DPZ
DNKN
PNRA
WEN
YUM
QSR
CMG

Company Name
MCDONALD'S CORP
DARDEN RESTAURANTS INC
ARAMARK
STARBUCKS CORP
DOMINO'S PIZZA INC
DUNKIN' BRANDS GROUP INC
PANERA BREAD CO
WENDY'S CO
YUM BRANDS INC
RESTAURANT BRANDS INTL INC
CHIPOTLE MEXICAN GRILL INC

Recent
Price ($)
95.63
66.43
30.65
48.24
100.43
48.11
182.89
10.52
79.49
39.30
681.55

Market
Cap ($M)
91,721
8,356
7,281
72,341
5,586
4,654
4,652
3,867
34,450
26,544
21,161

Price/
Earnings
19.80
67.10
39.81
29.24
35.12
28.98
27.50
32.88
34.71
NM
48.23

Net Sales
TTM ($M)
27,441.30
6,535.70
14,772.19
17,011.40
1,993.83
748.71
2,529.20
2,061.06
13,279.00
1,197.30
4,108.27

Net Income
TTM ($M)
4,757.80
690.70
189.69
2,510.50
162.59
176.36
179.29
121.43
1,051.00
158.00
445.37

The peer group comparison is based on Major Restaurants companies of comparable size.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: April 19, 2015

PAGE 2

April 19, 2015


NYSE: MCD

MCDONALD'S CORP
Sector: Consumer Goods & Svcs Restaurants Source: S&P
Annual Dividend Rate
$3.40

Annual Dividend Yield


3.55%

COMPANY DESCRIPTION
McDonald's Corporation operates and franchises
McDonald's restaurants in the United States, Europe, the
Asia/Pacific, the Middle East, Africa, Canada, and Latin
America. The company's restaurants offer various food
products, soft drinks, coffee, and other beverages. As of
December 31, 2014, it operated 36,258 restaurants,
including 29,544 franchised restaurants comprising
20,774 franchised to conventional franchisees, 5,228
licensed to developmental licensees, and 3,542 licensed
to foreign affiliates; and 6,714 company-operated
restaurants. The company was founded in 1940 and is
based in Oak Brook, Illinois.
MCDONALD'S CORP
One McDonald's Plaza
Oak Brook, IL 60523
USA
Phone: 630-623-3000
http://www.aboutmcdonalds.com

Beta
0.36

Market Capitalization
$91.7 Billion

52-Week Range
$87.62-$103.78

Price as of 4/16/2015
$95.63

STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our
overall recommendation of MCD shares. It is provided in order to give you a deeper understanding of our
rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is
important to note, however, that these factors only tell part of the story. To gain an even more comprehensive
understanding of our stance on the stock, these factors must be assessed in combination with the stocks
valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR

SCORE

2.0

Growth
out of 5 stars
weak
Measures the growth of both the company's income statement and
cash flow. On this factor, MCD has a growth score better than 30% of
the stocks we rate.

strong

4.0

Total Return
out of 5 stars
weak
Measures the historical price movement of the stock. The stock
performance of this company has beaten 70% of the companies we
cover.

strong

5.0

Efficiency
out of 5 stars
weak
Measures the strength and historic growth of a company's return on
invested capital. The company has generated more income per dollar of
capital than 90% of the companies we review.

strong

4.0

Price volatility
out of 5 stars
weak
Measures the volatility of the company's stock price historically. The
stock is less volatile than 70% of the stocks we monitor.

strong

4.0

Solvency
out of 5 stars
weak
Measures the solvency of the company based on several ratios. The
company is more solvent than 70% of the companies we analyze.

strong

4.5

Income
out of 5 stars
weak
Measures dividend yield and payouts to shareholders. The company's
dividend is higher than 80% of the companies we track.

strong

THESTREET RATINGS RESEARCH METHODOLOGY


TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both
price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to
perform against a general benchmark of the equities market and interest rates. While our model is
quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include
expected equities market returns, future interest rates, implied industry outlook and forecasted company
earnings. Objective elements include volatility of past operating revenues, financial strength, and company
cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown
as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of
acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings
growth; and the financial strength of the underlying company as compared to its stock's valuation as
compared to projected earnings growth; and the financial strength of the underlying company as compared
to its stock's performance. These and many more derived observations are then combined, ranked, weighted,
and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of
selecting stocks.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: April 19, 2015

PAGE 3

April 19, 2015


NYSE: MCD

MCDONALD'S CORP
Sector: Consumer Goods & Svcs Restaurants Source: S&P
Annual Dividend Rate
$3.40

Annual Dividend Yield


3.55%

Consensus EPS Estimates ($)


IBES consensus estimates are provided by Thomson Financial

1.06

4.90 E

5.31 E

Q1 FY15

2015(E)

2016(E)

Market Capitalization
$91.7 Billion

52-Week Range
$87.62-$103.78

Price as of 4/16/2015
$95.63

FINANCIAL ANALYSIS
MCDONALD'S CORP's gross profit margin for the fourth quarter of its fiscal year 2014 is essentially
unchanged when compared to the same period a year ago. Sales and net income have dropped, although the
growth in net income underperformed the average competitor within the industry, the revenue growth did not.
MCDONALD'S CORP has average liquidity. Currently, the Quick Ratio is 1.20 which shows that technically this
company has the ability to cover short-term cash needs. The company's liquidity has decreased from the
same period last year, indicating deteriorating cash flow.
During the same period, stockholders' equity ("net worth") has decreased by 19.71% from the same quarter
last year. Together, the key liquidity measurements indicate that it is relatively unlikely that the company will
face financial difficulties in the near future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the
next 12-months. To learn more visit www.TheStreetRatings.com.

INCOME STATEMENT
Net Sales ($mil)
EBITDA ($mil)
EBIT ($mil)
Net Income ($mil)

Beta
0.36

Q4 FY14
6,572.20
2,219.10
1,811.60
1,097.50

Q4 FY13
7,093.20
2,523.60
2,115.00
1,397.00

Q4 FY14
2,077.90
34,281.40
14,989.70
12,853.40

Q4 FY13
2,798.70
36,626.30
14,129.80
16,009.70

Q4 FY14
43.85%
33.76%
27.56%
0.80
13.87%
37.01%

Q4 FY13
44.43%
35.57%
29.82%
0.77
15.25%
34.89%

Q4 FY14
1.52
0.54
147.80
12.26

Q4 FY13
1.59
0.47
133.50
15.84

Q4 FY14
963
0.85
1.13
13.35
NA
7,406,968

Q4 FY13
990
0.81
1.40
16.16
NA
6,211,139

BALANCE SHEET
Cash & Equiv. ($mil)
Total Assets ($mil)
Total Debt ($mil)
Equity ($mil)
PROFITABILITY
Gross Profit Margin
EBITDA Margin
Operating Margin
Sales Turnover
Return on Assets
Return on Equity
DEBT
Current Ratio
Debt/Capital
Interest Expense
Interest Coverage
SHARE DATA
Shares outstanding (mil)
Div / share
EPS
Book value / share
Institutional Own %
Avg Daily Volume

2 Sum of quarterly figures may not match annual estimates due to


use of median consensus estimates.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: April 19, 2015

PAGE 4

April 19, 2015


NYSE: MCD

MCDONALD'S CORP
Sector: Consumer Goods & Svcs Restaurants Source: S&P
Annual Dividend Rate
$3.40

Annual Dividend Yield


3.55%

RATINGS HISTORY
Our rating for MCDONALD'S CORP has not changed
since 3/2/2004. As of 4/16/2015, the stock was
trading at a price of $95.63 which is 7.9% below its
52-week high of $103.78 and 9.1% above its 52-week
low of $87.62.

BUY: $103.04

2 Year Chart

Beta
0.36

Market Capitalization
$91.7 Billion

$105
$100

Price/Earnings

$95
$90
2014

MOST RECENT RATINGS CHANGES


Date
Price
Action
4/16/13
$103.04 No Change

Price reflects the closing price as of the date listed, if available

RATINGS DEFINITIONS &


DISTRIBUTION OF THESTREET RATINGS
(as of 4/16/2015)

29.21% Hold - We do not believe this stock offers


conclusive evidence to warrant the purchase or sale of
shares at this time and that its likelihood of positive total
return is roughly in balance with the risk of loss.

TheStreet Ratings
14 Wall Street, 15th Floor
New York, NY 10005
www.thestreet.com
Research Contact: 212-321-5381
Sales Contact: 866-321-8726

Price/Sales

discount

MCD 13.68
Peers 16.28
Discount. The P/CF ratio, a stocks price divided by
the company's cash flow from operations, is useful
for comparing companies with different capital
requirements or financing structures.
MCD is trading at a discount to its peers.
Price to Earnings/Growth

premium

discount

MCD 12.00
Peers 3.81
Premium. The PEG ratio is the stocks P/E divided by
the consensus estimate of long-term earnings
growth. Faster growth can justify higher price
multiples.
MCD trades at a significant premium to its peers.
Earnings Growth

lower

5
higher

MCD -13.13
Peers 314.17
Lower. Elevated earnings growth rates can lead to
capital appreciation and justify higher
price-to-earnings ratios.
However, MCD is expected to significantly trail its
peers on the basis of its earnings growth rate.
Sales Growth

discount

MCD 3.36
Peers 3.05
Premium. In the absence of P/E and P/B multiples,
the price-to-sales ratio can display the value
investors are placing on each dollar of sales.
MCD is trading at a premium to its industry on this
measurement.

premium

discount

MCD 7.16
Peers 14.64
Discount. A lower price-to-book ratio makes a
stock more attractive to investors seeking stocks
with lower market values per dollar of equity on the
balance sheet.
MCD is trading at a significant discount to its peers.
premium

23.35% Sell - We believe that this stock is likely to


decline by more than 10% over the next 12 months, with
the risk involved too great to compensate for any
possible returns.

MCD 18.01
Peers 28.31
Discount. A lower price-to-projected earnings ratio
than its peers can signify a less expensive stock or
lower future growth expectations.
MCD is trading at a significant discount to its peers.
Price/Book

Price/CashFlow

discount

premium

47.44% Buy - We believe that this stock has the


opportunity to appreciate and produce a total return of
more than 10% over the next 12 months.

discount

premium

To
Buy

MCD 19.80
Peers 33.48
Discount. A lower P/E ratio than its peers can
signify a less expensive stock or lower growth
expectations.
MCD is trading at a significant discount to its peers.
Price/Projected Earnings

From
Buy

Price as of 4/16/2015
$95.63

VALUATION
BUY. The current P/E ratio indicates a significant discount compared to an average of 33.48 for the Hotels,
Restaurants & Leisure industry and a value on par with the S&P 500 average of 20.57. To use another
comparison, its price-to-book ratio of 7.16 indicates a significant premium versus the S&P 500 average of 2.84
and a significant discount versus the industry average of 14.64. The current price-to-sales ratio is well above
the S&P 500 average and above the industry average, indicating a premium. Upon assessment of these and
other key valuation criteria, MCDONALD'S CORP proves to trade at a discount to investment alternatives
within the industry.

premium

2013

52-Week Range
$87.62-$103.78

lower

5
higher

MCD -2.37
Peers 13.17
Lower. A sales growth rate that trails the industry
implies that a company is losing market share.
MCD significantly trails its peers on the basis of
sales growth

DISCLAIMER:
The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but
TheStreet Ratings cannot guarantee its accuracy and completeness, and that of the opinions based thereon. Data is provided
via the COMPUSTAT Xpressfeed product from Standard &Poor's, a division of The McGraw-Hill Companies, Inc., as well as
other third-party data providers.
TheStreet Ratings is a division of TheStreet, Inc., which is a publisher. This research report contains opinions and is provided
for informational purposes only. You should not rely solely upon the research herein for purposes of transacting securities or
other investments, and you are encouraged to conduct your own research and due diligence, and to seek the advice of a
qualified securities professional, before you make any investment. None of the information contained in this report constitutes,
or is intended to constitute a recommendation by TheStreet Ratings of any particular security or trading strategy or a
determination by TheStreet Ratings that any security or trading strategy is suitable for any specific person. To the extent any of
the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the
investment needs of any specific person. Your use of this report is governed by TheStreet, Inc.'s Terms of Use found at
http://www.thestreet.com/static/about/terms-of-use.html.

This report is for information purposes only and should not be considered a solicitation to buy or sell any security. Neither TheStreet Ratings nor any other party guarantees its accuracy
or makes warranties regarding results from its usage. Redistribution is prohibited without the express written consent of TheStreet Ratings. Copyright(c) 2006-2015. All rights reserved.

Report Date: April 19, 2015

PAGE 5

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