McDonald's (MCD) is likely to record relatively better next few quarters but faces structural headwinds that could sustain, Morgan Stanley said in a Monday research note.
The brokerage said it sees a more balanced risk/reward skew at present, considering its leadership in the quick service restaurant segment versus structural headwinds. Analysts remain below consensus estimates beyond 2025 on lower income consumer pressures, health considerations, the requirement for value proposition realignment, and a mixed future outside the US.
While ongoing pricing, value focus, and potential product drivers could support the stock, "we don't see as much re-rating potential, nor really above-consensus top/bottom line growth in the medium term," or be "overly bullish based on QSR product cycles," analysts said.
Legacy players in the burger QSR segment are shrinking, a few are taking share; McDonald's is more recently in between the two, according to analysts.
Morgan Stanley said it expects almost 7% EPS growth beyond 2025 vs 8%-9% consensus estimates. It modeled fiscal 2025 EPS to $12.19 from $12.08 and 2026 EPS to $12.97 from $12.99, earlier.
The brokerage said it downgraded the stock to equalweight from overweight and cut its price target to $324 per share from $329.
Price: 302.61, Change: -4.70, Percent Change: -1.53
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