ARGUS Reiterates 'Buy' Rating on Burger King (BKC)

June 17, 2008 3:35 PM EDT

ARGUS reiterates a 'Buy' rating on Burger King (NYSE: BKC). Price target $34.

ARGUS analyst, John Staszak, says, "Based on our channel checks, Burger King appears to be benefiting in the U.S. from its 'barbell' strategy, which emphasizes both value menu items and premium products. It does not appear that revenues have been hurt by a slowing economy...Our long-term rating also remains BUY. Despite higher food and labor costs, we expect a shift toward highly profitable franchise royalties and improvements in the company's international operations to boost earnings. Indeed, the company's strong 3Q08 earnings growth suggests that management's turnaround plan is working. Going forward, we expect management to rebuild previously mismanaged brands. We also expect growth from a greater emphasis on breakfast and late-night sales, as well as overseas unit expansion. In the U.S., the company is introducing new products and controlling operating expenses, particularly for labor. Over the long term, we believe that management is likely to increase profitability through stronger advertising, new product introductions and the opening of additional restaurants with smaller, less expensive layouts and drive-thru service."

Burger King Holdings, Inc. (BKH) is a fast food hamburger restaurant (FFHR).

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