UPDATE: RBC Capital Upgrades McDonald's (MCD) to Outperform

(Updated - March 4, 2015 6:56 AM EST)

RBC Capital upgraded McDonald's (NYSE: MCD) from Sector Perform to Outperform with a price target of $115.00 (from $93.00). Analyst David Palmer noted its discount franchised restaurant peers, and he expects outsized EPS growth in the second half of 2015 and beyond.

"Our target increase and upgrade is based largely on our view that SSS and ROIC trends will turn positive by year end and continue to grow in 2016. This improvement will be based partly on a turn in the US division, a stabilization of international trouble areas, and refranchising," said Palmer.

"We expect outsized EPS growth beginning in the second half of 2015 will drive ~200bps of ROIC improvement by 2016. We also believe improved industry growth, the end of crises in Japan, China, and Russia, and more stable FX will help put an end to downward EPS revisions. Our new target equates to 21x our 2016 EPS estimate," continued the analyst.

"McDonald's valuation is at a significant discount to franchised restaurant peers, and is at a modest discount to an average of global mega-cap consumer peers. Yet, McDonald's faces relatively fewer structural headwinds. Many large consumer brands have core product perception issues which are difficult to escape. While McDonald’s has faced similar quality questions, we believe the company has the ability and opportunity to upgrade its core product–and can more easily shift to mass personalized marketing through digital engagement," he added.

For an analyst ratings summary and ratings history on McDonald's click here. For more ratings news on McDonald's click here.

Shares of McDonald's closed at $99.74 yesterday.

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