Ethan Miller/Getty Images News
Barclays swung in the restaurant sector on Wednesday with two notable rating actions. The firm upgraded Yum! Brands (NYSE:YUM) to an Overweight rating from Equal Weight and downgraded Wendy’s (NASDAQ:WEN) to Equal Weight from Overweight. In general, Barclays expects expects discretionary categories such as casual dining and specialty to continue to outperform the broad restaurant sector.
Yum! Brands (YUM) was noted to stand tall as a large cap, global restaurant portfolio company with three industry-leading, global quick service brands, expected to deliver an average 6% unit and 3% comp growth over the next three years. “While comp growth will vary, we believe unit growth should be the primary focus for driving sustainable, consistent revenue growth over time,” updated analyst Jeff Bernstein. The firm boosted its price target on YUM to $146 from $126.
Meanwhile, Barclays sees Wendy’s Company (WEN) as a small cap, primarily domestic, single brand restaurant company. The firm expects Wendy’s (WEN) to deliver an average of 3% unit and 2% comp growth over the next three years. “While comp growth will vary, we believe unit growth should be the primary focus for driving sustainable, consistent revenue growth over time,” wrote Bernstein. However, Wendy’s limited global recognition is seen holding back international unit growth, and increased domestic competition is seen holding back comparable sales growth. Barclays cut its price target on Wendy’s (WEN) to $21 from $23.
Shares of Yum! Brands (YUM) traded flat on Wednesday, while Wendy’s (WEN) fell 1.50%.
