Citgroup Analyst Sees More Slow Growth For Fast Food

Slow growth for fast food suggests the middle class isn't getting a bang from the economy's recovery, but higher-priced restaurants should see healthy sales trends, an analyst said Thursday.

Citigroup's Gregory R Badishkanian sees total industry sales growth in the low single digits during in the upcoming year, roughly matching 2014.

Restaurants like Chipotle Mexican Grill, Inc. (NYSE: CMG) and Starbucks Corporation (NASDAQ: SBUX) that cater to higher-income consumers will benefit from current trends, according to Badishkanian.

Yet the analyst launched coverage on Wendys Co (NASDAQ: WEN) Thursday with a Buy rating and $11 target, citing menu innovation and international expansion prospects, in addition to its strong free cash flow.

Badishkanian also reinstated coverage for Restaurant Brands International Inc (NYSE: QSR) with a Buy rating and $46 target.

Resulting from the recent merger of Burger King and Tim Hortons, Restaurant Brands will benefit from cost cuts, international expansion and possible acquisitions, Badishanian said.

The analyst also maintains Buy ratings on Chipotle, Darden Restaurants, Inc. (NYSE: DRI) and Brinker International, Inc. (NYSE: EAT) because of growth prospects and turnaround initiatives.

But Badishanian is Neutral on Buffalo Wild Wings (NASDAQ: BWLD) and Domino's Pizza, Inc. (NYSE: DPZ), citing valuation.