McDonald's Shareholders: 2 Top Wall Street Analysts Are Talking

In two separate reports published Monday, David Palmer of RBC Capital Markets and Brian Bittner of Oppenheimer discussed McDonald's Corporation (NYSE: MCD), offering two different takes on the company's prospects.

RBC: Negative Start For U.S. Turnaround

Palmer estimated McDonald's March U.S. same-store sales growth has actually declined by 4 percent (versus a 2 percent decline previously estimated), worse than the consensus estimate of negative 2.8 percent. At the same time, the analyst suggested that the entire fast food industry has seen same-store sales growth of 1 percent to 2 percent.

Palmer continued that McDonald's share losses can be attributed to its chicken tenders that lacked the quality consumers expect. The analyst added that McDonald's issues are not "structural" since competitors are growing sales.

Nevertheless, Palmer is bullish on McDonald's future, noting shares have a favorable risk to reward profile.

Related Link: Should McDonald's Spin Out A McREIT?

"McDonald's PE and EBITDA multiple (and dividend yield) are at a discount to its peer group," Palmer argued. "On an EV/EBITDA basis, McDonald's trades at a 2 turn discount to global consumer mega caps and hybrid systems and a 4+ turn discount to 100% franchised systems."

Bottom line, McDonald's competitors have seen success, suggesting that a mixture of value, food quality upgrades, simplifications and mobile/digital initiatives can boost demand and throughput.

Palmer lowered his 2015 earnings estimate from $4.89 to $4.77 while lowering his 2016 earnings per share estimate from $5.52 to $5.36.

Shares remain Outperform rated with a price target lowered to $110 from a previous $115.

Oppenheimer: What If McDonald's Forms A REIT Spin-Off?

Brian Bittner explored a hypothetical (yet unlikely) scenario where McDonald's forms an REIT spin-off.

According to Bittner, an REIT could drive value upside to a range of $117 to $132 per share, but would also leave restaurant investors owning a smaller, more restricted company with greater earnings volatility.

According to Bittner, McDonald's investors are "increasingly focused" on its real estate ownership and the impact of a potential REIT spinoff. After all, the company owns 70 percent of its buildings and 45 percent of its land.

"Historically, McDonald's has suggested such a corporate restructuring could damage relationships with franchisees, operators and suppliers and give less certainty on location longevity," Bittner wrote. "Therefore, we are not confident a REIT spinoff will unfold."

Shares remain Perform rated with no assigned price target.