Ahead of the Bell: Janney downgrades McDonald's

Janney downgrades McDonald's ahead of next week's 2Q report

Associated Press

NEW YORK (AP) -- A Janney analyst on Wednesday downgraded McDonald's Corp., saying he is concerned that investors are too optimistic about U.S. sales trends this summer.

Based on his survey of select U.S. franchisees, analyst Mark Kalinowski said he was lowering estimates for June sales at stores open at least a year to growth of 1.1 percent, from 2 percent. He also lowered his July estimate to an increase of 1.5 percent from 2 percent. The figure is a key metric because it strips out the impact of newly closed and opened locations.

Shares of McDonald's Corp. slipped 1.2 percent to $99.70 in premarket trading.

The analyst cut his earnings per share forecast for the year by 3 cents, to $5.68. That's still roughly in line with the market: On average, analysts polled by FactSet expect per-share profit of $5.69.

Kalinowski cut his rating on shares of the world's biggest hamburger chain to "Neutral" instead of "Buy."

McDonald's, based in Oak Brook, Ill., is set to report its second-quarter results on Monday before the market opens. The fast-food chain has been trying to freshen up its menu after a key monthly sales figure dipped, the first time in nearly a decade, late last year. The company sacked the head of its U.S. division soon after.

Since then, the chain has introduced chicken wraps intended to attract people in their 20s and 30s who want fresher, healthier food. The wraps are positioned as "premium" items, which should help the company's profit margins. McDonald's has also recently offered an egg white option for its breakfast sandwiches and expanded its lineup of Quarter Pounders.

Kalinowski said his survey included 28 franchisees who operate 216 locations.

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