- McDonald’s has voted out president and CEO Steve Easterbrook.
- Chris Kempczinski will be stepping in as the company’s new president and CEO.
McDonald’s (MCD) announced yesterday that its board members had voted out president and CEO Steve Easterbrook due to a consensual relationship he had with an employee. Easterbrook is no longer a member of the company’s board.
In a press release, McDonald’s announced Easterbrook had “violated company policy and demonstrated poor judgment.” The company named Chris Kempczinski as its new president and CEO. Kempczinski was previously president of McDonald’s USA. Joe Erlinger will be filling that role.
Easterbrook’s departure could hurt McDonald’s stock, which is already under pressure. Since Easterbrook took over as CEO in March 2015, McDonald’s has stock nearly doubled. He is also credited for turning around the company. When Easterbrook replaced CEO Don Thompson, McDonald’s was struggling to drive comps, with weak traffic across all major segments.
Why McDonald’s stock is under pressure
McDonald’s stock has been under pressure since the company posted weaker-than-expected third-quarter earnings results on October 22. The stock has fallen about 8% since the company’s sales and earnings missed Wall Street’s estimates. Management blamed weak sales at company-operated restaurants and higher interest expenses for the soft performance. However, the company’s global comps growth beat Wall Street’s forecast.
Whereas McDonald’s sales rose about 1% YoY (year-over-year) to $5.43 billion, they fell short of analysts’ estimate of $5.49 billion. Revenue at company-operated restaurants fell by about 4%. The company’s adjusted EPS fell 2% YoY to $2.11, missing analysts’ estimate of $2.21.
Analysts expect McDonald’s adjusted EPS to continue to fall in the fourth quarter. In fiscal 2019, they forecast its revenue staying flat and its EPS falling by about 1%.
Wall Street remains upbeat
Despite the company’s weak financial performance, analysts have kept a favorable outlook on McDonald’s stock. Of the 33 analysts covering the stock, 23 suggest “buy,” and ten suggest “hold.” Their average price target of $222.24 on MCD stock implies a 14.7% upside based on its November 1 closing price of $193.94. This year, McDonald’s stock is up about 9%, lagging behind broader markets.