Here's Why Citigroup Lowered McDonald's Estimates And Price Target

Gregory Badishkanian of Citigroup commented in a note on Sunday that McDonald's Corporation (NYSE: MCD) December global same-store sales of negative 0.1 percent was better than expected, despite the fourth-quarter earnings per share miss.

However, Badishkanian notes that McDonald's management team suggested that January same-store sales are expected to be negative and results will remain pressured, especially throughout the first half of 2015. The analyst does add that management's comments is “rather in line” with investors' expectations.

McDonald's is expected to see a 2.0 percent gain in net restaurant additions in 2015 while food costs should be higher by 1.5 percent to 2.5 percent in U.S. and Europe. SG&A growth is expected to be higher by 7 percent to 8 percent due to an increased incentive-based comp. Finally, the fiscal year tax rate is expected to be in the 31 percent to 33 percent rage with some volatility from quarter to quarter to fall outside of this range.

Accordingly, Badishkanian is lowering his full year fiscal 2015 and fiscal 2016 estimates by $0.52 and $0.55 each to $5.08 and $5.45, respectively. The analyst also introduced a fiscal 2017 earnings per share estimate of $5.87.

Shares are Neutral rated with a price target lowered to $96 from a previous $101.