Burger King Upgraded to “Buy” at Deutsche Bank (BKC)

in economy Gold Gold Investment by admin — March 18, 2010 6:13 am | no comments

Fast food giant Burger King Holdings, Inc. ( BKC ) was upgraded to a “Buy” on Thursday by analysts at Deutsche Bank. The analyst also raised its price target for BKC shares, which had closed at $20.17 on Wednesday, to $24 from $19. Deutsche analyst noted that “BKC shares have underperformed the market by ~60% over the past year. While the stock has bounced a bit recently, we see room for further upside from here as sales and margins remain well below cyclical peaks and as investors may begin to seek out cheaper names that can still benefit from a recovering economy.” “While management still has work to do to rebuild credibility, we see several positives emerging in the BKC story, including: (1) signs of a bottom in sales trends, (2) easing compares (US & Canada segment SSS compares ease ~600bps in F4Q10), (3) an improving macro-economic backdrop for core consumers, (4) renewed focus on breakfast (planned for later in 2010), (5) increased M&A activity in the sector, (6) a thawing in franchisee relations, (7) compelling valuation (~7.5x EBITDA), and (8) still-negative Street sentiment (14 Holds vs. 4 Buys; 11% short interest), leaving plenty of room for more constructive views. Our recent channel checks also support management’s commentary that sales trends improved in Mar relative to Jan/Feb, with our checks pointing to SSS down 3-4% in Mar vs. the -8% reported for Jan/Feb.” In addition, Deutsche Bank raised its 2010 and 2011 full-year earnings estimates for the company. Burger King shares rose 53 cents, or +2.6%, in premarket trading Thursday. The Bottom Line We have avoided shares of BKC since our early June 2008 coverage began, when the shares were trading at $28.25. The company has a dividend yield of 1.24%, based on last night’s closing stock price of $20.17. The stock has technical support in the $17-$18 price area. If the shares can firm up, we see overhead resistance around the $23 price level. We would remain on the sidelines for now. Burger King Holdings, Inc. ( BKC ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.3 out of 5 stars. Be