TD Cowen downgraded McDonald's (NYSE:MCD) from Buy to Hold, lowering the price target to $280.00 from $285.00 per share in a note to clients Wednesday, following the fast food giant's latest quarterly earnings.
McDonald's reported Q2 EPS of $2.80, $0.27 worse than the analyst estimate of $3.07. Revenue for the quarter came in at $6.49 billion versus the consensus estimate of $6.62 billion.
McDonald's shares rose more than 3% following the release on Monday and gained a further 1.9% on Tuesday.
"In the U.S., we now model 3Q24E & 4Q24E comps of -1% and Flat, from Flat and +1%, respectively," said TD Cowen. "Management cited July U.S. sales trended around 2Q's soft exit rate that extinguishes prior optimism surrounding the 6/25 launch of the $5 Meal Deal."
The bank highlighted proprietary survey data that it said indicates trough value perceptions, which they expect will take time to fix.
Looking ahead, TD Cowen said it will monitor survey data to help gauge how value efforts are resonating as a key factor in McDonald's ability to achieve consensus second half and 2025 U.S. same store sales.
"While early, July data following the launch of the $5 Meal Deal showed only a modest improvement from June in the percentage of low income respondents citing above average value perceptions relative to quick service peers' change," TD Cowen analysts wrote.
"We look at data on a smoothed, 3 month rolling basis that indicates McDonald's underperformance to the peer group remains relatively unchanged," they added.
Overall, the bank feels that McDonald's "value perception outperformance gap experienced in 2023 will take time to reclaim."