McDonald's Takes a Hit After Downgrade

CHICAGO (Reuters) - Shares of McDonald's Corp. (NYSE:MCD - news) fell on Thursday after a Wall Street analyst downgraded the world's largest fast food chain to ``long-term buy'' from ``buy.''

Shares of Oak Brook, Ill.-based McDonald's closed off 1 ^3/4 to 34 ^9/16 on the New York Stock Exchange.

JP Morgan analyst John Ivankoe downgraded the stock, citing weakness in the company's early-April sales and the likelihood of difficult sales comparisons in June, due in part to strong sales in June 1999 from a Teenie Beanie Babies promotion.

``The United States is currently experiencing negative comps in April as an equivalent year-to-year Monopoly and Furby promotion is not generating positive customer traffic flow,'' Ivankoe wrote in a research note.

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``Upcoming comparisons in June are the most difficult of the year. Thus, we are not expecting solid comparable performance in the U.S. in the second quarter,'' he wrote.

A spokeswoman for McDonald's would not comment on the company's April sales performance.

Despite Thursday's share price weakness, analysts said the burger giant was on track to meet profit expectations for the first quarter. They also said quarterly sales data released on Wednesday were in line with expectations.

McDonald's said first-quarter sales at its company-owned and franchised restaurants worldwide rose 9 percent from a year ago to $9.507 billion on a constant currency basis.

In the United States, sales were $4.505 billion, up 5 percent.

``Sales figures for the company matched my forecast, and I was not disappointed in the numbers at all,'' said Mark Kalinowski, restaurant industry analyst with Salomon Smith Barney.

Analysts also expect McDonald's to match analysts' consensus first-quarter earnings estimate of 32 cents a share, as compiled by First Call/Thomson Financial. In last year's first quarter McDonald's earned 29 cents a share.

``We think comps should be slightly up in the first quarter,'' said Ann Gurkin, an analyst with Davenport & Co. ''We're looking for 32 cents (a share) and we think they should come in at that number.''

Salomon's Kalinowski said that if McDonald's deviated at all from the consensus earnings forecast, it was likely to come in a penny higher at 33 cents a share.

McDonald's is to report first-quarter earnings on April 20, analysts said.

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