McDonalds: Downside Looks Limited Despite Disappointing US Results, Says UBS

In a report published today, UBS analyst Keith Siegner maintained a Buy rating on McDonalds Corp. (NYSE:MCD) and a $110 price target.

Siegner noted: “Another month of disappointing US results underscores the need for urgency behind substantive change beyond just ops/service. Results in Europe were better than expected behind U.K. strength (France & Germany flat) and not as bad as feared drag from Russia. Downside in APMEA was expected given food supplier fallout in China and Japan (-25.1%), but incremental expense and tax impact was a negative surprise that will weigh on consensus estimates. We’re lowering our 2014 EPS estimate to $5.48 from $5.61 behind higher taxes ($0.07), currency ($0.03) and headwinds from Russia margin impact (incremental store closures & supply reroute) and slightly higher than anticipated costs assoc. with the supplier matters.”

However, the analyst explained his Buy rating saying, “Our upside scenario of $125 includes i) U.S. op margins holding 2013 levels on sss closer to 3%, ii) modest other cost control efforts including G&A, and iii) a still lower than average consumer multinationals EBITDA multiple of 12x.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Keith Siegner has a total average return of 8.5% and a 57.9% success rate. Siegner has an 4.9% average return when recommending MCD, and is ranked #1070 out of 3298 analysts.

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