Burger King Holdings (BKC) has resumed unit growth after four years of negative or no growth, during which time it repurchased and/or closed more than 1,000 under-performing franchises while reinvigorating its brand.

In our opinion, BKC is poised to grow earnings at a high-teens CAGR [compound annual growth rate] over the next five years by accelerating unit growth, improving average unit volumes through restaurant remodels and new product launches, and by expanding restaurant margins closer to those of McDonald’s (MCD), the category leader.

Though margins were squeezed in the latest quarter by high food cost inflation, commodity prices appear to be moderating. Moreover, we think BKC shares offer investors an opportunity to participate in the fast-growing economies of Asia and South America, which are central to BKC’s expansion plans but where it has a very small presence relative to MCD and Yum! Brands.

“BKC” Free Stock Analysis: Buy? Sell? Hold?
Zacks Investment Research

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