Oppenheimer analyst Brian Bittner came out today with a research note on McDonald's Corporation (NYSE:MCD), reiterating a Perform rating on the stock. The analyst explored a hypothetical REIT spin-off.

Bittner noted, "Investors are increasingly focused on MCD’s real estate ownership and the impact of a potential REIT spinoff. MCD owns 70% of its buildings and 45% of its land. To better understand the opportunity we performed a deep-dive analysis with assistance from Oppenheimer’s REIT research team. Our work suggests a REIT structure could hypothetically cause MCD’s value to swing upwards to $117-132/share versus ~$96/share, currently. REITs carry higher valuations and pay no taxes. But, new-MCD would be much smaller market cap with a more volatile earnings model without its massive rental income (56% of profits today) which we explore within."

Bottom line, "A REIT could drive value upside ($117-132/sh), but would also leave restaurant investors a smaller, more restricted MCD with much greater earnings volatility. We believe a classic sales turn remains the largest key to value creation. Our Perform thesis is based on lack of earnings upside through '16 against still-optimistic Street estimates."

According to TipRanks.com, which measures analysts' and bloggers' success rate based on how their calls perform, analyst Brian Bittner has a total average return of 22.2% and a 79.8% success rate. Bittner is ranked #26 out of 3568 analysts.


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