Wall Street no longer lovin' McDonald's

The analyst downgrades for McDonald's (MCD) stock came fast Wednesday, the day after a disappointing quarterly report. Wall Street firms used words like "deteriorating," "limited" and "uninspiring" to describe the company and its business prospects.

Analysts had stuck by the fast-food giant for a long time, even as global sales started to slide and one promotional stunt after another failed to take hold. Now, many of them are no longer willing to wait it out.

Four analysts dinged the stock Wednesday, responding to a 1.5 percent cut in U.S. sales over the second quarter and revenue and profit that failed to impress. The company's U.S. business declined for the third straight quarter. Now, only 29 percent of analysts recommend buying McDonald's shares, the lowest level in five years, MarketWatch reports.

Many observers drew comparisons between McDonald's quarter and the jaw-dropping results offered recently from Chipotle Mexican Grill (CMG). CNBC host Jim Cramer said the two quarterly results make a "statement about what people want to eat and, as a result, what investors should want to buy."

In the U.S., McDonald's is seeing "two different worlds" among households earning more than $75,000 versus those earning less than $45,000, chief executive Don Thompson said in an earnings call with analysts Tuesday.

The company is being hurt on both ends of the economic spectrum. Lower-income families have struggled to recover after the Great Recession, and still lack the discretionary income for many trips out to eat. Upper-income families, meanwhile, are willing to pay more money to visit Chipotle and other fast-casual restaurants.

McDonald's shares fell by nearly 2 percent Tuesday and dropped another 1 percent Wednesday to $95.35.

Here's what some equity analysts had to say about the stock:

Lacks a near-term catalyst: Analysts with Robert W. Baird said they expect margins to remain under pressure as costs rise.

An uninspiring product pipeline: The lack of innovative new menu items has contributed to market share losses, particularly in the U.S., wrote Sterne Agee analyst Lynne Collier.

An activist investor could step up: The turnaround is taking longer than expected at the company, said Rachael Rothman of Susquehanna Financial. "The deteriorating fundamentals increase the likelihood of activist involvement."

Budget-conscious diners are hurting sales: "Restaurants are being negatively impacted by a large segment of the population who are watching their discretionary spending closely," said NPD analyst Bonnie Riggs. "Going to a restaurant is a nice-to-have and not a need-to-have."

  • Kim Peterson

    Kim Peterson is a financial journalist covering business and the economy. She has written for several online and print publications, including MSN Money and The Seattle Times.