Despite posting solid upside yesterday for both Q2 EPS ($0.94 vs. $0.86 consensus) and revenue ($6.08 billion vs. $5.92 billion consensus), McDonald’s (MCD) stock was down slightly for the day on a poor outlook.
Rising commodity prices and upward pressure on labour costs in Europe cast doubt on whether MCD can sustain its performance through the end of the year.
Consequently, Deutsche has downgraded McDonald’s to HOLD and cut MCD’s target $4 to $63. The firm believes profitability could be reduced by:
- higher beef costs (15% of COGS)
- slower traffic
Deutsche downgrades McDonald’s (MCD) from Buy to HOLD, target cut from $67 to $63.