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McDonald’s Corp. (NYSE:MCDC) is having, for want of a better term, a fire sale. The company said last year it planned to sell 4,000 company-owned restaurants to franchisees by 2018.

Thursday McDonald’s announced it would book more than $200 million in charges in Q2 related to that sale (with a portion of the charge including moving company headquarters to downtown Chicago). McDonald’s said the charge would lower profit by about 20 cents a share.


Making Investors Happy

In a move intended to please investors, the company said it expected $500 million in general and administrative savings, mostly of which would be realized by the end of 2017.

The ultimate goal is to have no less than 95% of all locations owned by franchisees. When the sale of the 4,000 locations is complete the percentage of franchisee-owned locations should be about 93% according to the company.

Investors are in favor of the sales be cash flow from royalties, licensing and property leases tends to be more stable and produce a higher profit margin. This leaves franchisees to deal with the ups and downs of labor and commodity costs.

Sales Are Up – Here’s Why

So far, McDonald’s decision to offer all-day breakfast has been a winner.

Customers are happy because they no longer have to drive at Nascar-like speeds to get to the store before the 10:30 a.m. cutoff for breakfast burritos and hash browns.

McDonald’s is happy because sales have been up the past two quarters with most of the growth attributed to increased breakfast item sales.

Now the company is going to add McGriddles to the all-day breakfast menu. More good news for McDonald’s since McGriddles are estimated to account for 40% of the company’s same-store sales growth nationwide.

Q2 Earnings Report Set For July 26

Shares of McDonald’s have gained 25% in the past year compared to just 0.8% for the S&P 500. The company will report second-quarter results July 26.

McDonald’s stock closed Thursday at $120.92, up just $0.29 or 0.24%. Analysts’ average estimated EPS for Q2 is $1.39, compared with actual EPS in the quarter ending June 2015 of $1.26.

Revenue estimates for the company for Q2 2016 are $6.28 billion versus actual sales a year ago of $6.50 billion. This would represent a 3.3% drop in sales from the same quarter a year ago.

Both Zacks and TipRanks have Buy ratings on the stock.


Analyst Ratings Update

According to Founders Daily, 24 analysts cover MCD and have an average 2.42 (Buy) rating on the stock.

Eight equity analysts covering the stock see a big upside and rate McDonald’s a Strong Buy.

Among brokerage firms covering the stock 13 say McDonald’s is fairly valued and have a Hold rating on the stock.

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