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Lehman Cuts McDonald's to Market Perform

Lehman Brothers downgrades McDonald's (MCD) to market perform from strong buy.

Analyst Mitchell Speiser says 2002 is not the year to own McDonald's. He says his downgrade is due to the fact that continued price discounting is not driving traffic as Americans shift away from traditional fast food. And Mad Cow disease fears are now surfacing and sharply hurting comparisons in Japan.

Low-quality EPS is expected in 2002, with no visibility on 2003, particularly amidst economic rebound. The analyst cuts his $0.35 fourth quarter EPS estimate to $0.34 and cuts $1.52 2002 EPS to $1.45. He lowers his 10%-12% long-term EPS growth target to 7%-10%. He also cuts his $38 stock price target to $29, which is 18 times his $1.59 2003 forecast.

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