Citigroup Initiates Coverage On Wendy's, Says Company Is 'A Cut Above' Peers

Gregory Badishkanian of Citigrioup initiated coverage on Thursday of Wendy's Co (NASDAQ: WEN) with a Buy rating and $11 price target given the company's strong unit economics, restaurant re-imaging, menu innovation, international expansion opportunities and seasoned management team translates to it being “a cut above” its competitors.

“We expect same-store sales growth to come from both menu innovations as well as market share gains stemming from improved brand perception from the ongoing Imagine Activation program,” Badishkanian wrote. “Wendy's introduction of limited time offering menu items, categorized by higher-quality fresh ingredients, should help the company appeal to millennials and compete with fast casual segment competitors.”

According to Badishkanian, NPD data suggests that food quality is one of the main reasons why fast-casual traffic growth has outpaced the industry average. The analyst suggests that the company understands the industry trends and its appropriate strategies will help improve same-store sales by 2.6 percent in 2015 and 3 percent in 2016.

Badishkanian expects the company will achieve 15 percent earnings per share growth over the next three years as the company continues to maximize margins by controlling costs. As such, the analyst also expects the company to achieve high free cash flows that will continue to grow by 30 percent through 2015.