© Reuters. Citi sees “still less favorable” setup in McDonald’s, opens Negative Catalyst Watch
By Senad Karaahmetovic
A Citi analyst has weighed in cautiously on McDonald’s (NYSE: ) as he believes the risk-reward is less positive now amid growing macro challenges in Europe.
Currency and macro headwinds “loom over EPS estimates” heading into Q3 results and the winter, the analyst warned clients. As a result, the analyst adjusted estimates and lowered the price target to $246 from $275.
Furthermore, the analyst warned investors that McDonald’s valuation remains very high, leaving “little room for shares to absorb negative estimate revisions.”
“While we do not question the strength/macrostability of the US business, the US SSS would need to beat (already strong) expectations by an MSD percentage to offset mark-to-market for FX and even an LSD decline in Europe’s SSS outlook,” the analyst wrote in a research note.
The analyst also opened a 90-day negative catalyst watch for MCD shares.
McDonald’s shares are down modestly ahead of the open on Tuesday after posting a three-month low yesterday.