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Morgan Stanley Lowers McDonald's Estimates Due To Issues In Russia, China & Japan

Eric Niederer

In a note dated July 30, Morgan Stanley analyst John Glass lowered his 2014 and 2015 EPS estimates on McDonald's (NYSE: MCD) by $0.08 and $0.06, respectively, to reflect geopolitical issues in Russia and supplier issues in China and Japan.

Despite the lowered estimates, Glass said the effects are not large enough to change his thesis and currently rates the company at Overweight with a $110 price target.

Speaking on the estimate revision, Glass noted that together the three regions only account for 10 percent of McDonald's operating profit. Additionally, he added that this is a directional move only, as there is no way to "precisely" quantify the issues. However, he said this at least quantifies the magnitude of exposure.

Looking at each country individually, Glass said the impact of Russia, China and Japan could affect EPS by $0.02-$0.03, $0.02-$0.03 and $0.01-$0.03, respectively.

Following the release of the note, shares of McDonald's are down ~1 percent in Thursday's pre-market.

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