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The Zacks Analyst Blog Highlights: Burger King Worldwide, Office Depot, Barnes & Noble, ITOCHU and Kingfisher

Zacks Equity Research

For Immediate Release
Chicago, IL – March 04, 2014 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Burger King Worldwide, Inc.  (BKW-Free Report), Office Depot, Inc. (ODP-Free Report), Barnes & Noble, Inc. (BKS-Free Report), ITOCHU Corp. (ITOCY-Free Report) and Kingfisher plc (KGFHY-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday’s Analyst Blog:

Burger King Growth Plans on Track
Leading restaurateur, Burger King Worldwide, Inc.  (BKW-Free Report) has been undertaking a series of initiatives such as unit expansion, reimaging, closure of underperforming units and several other initiatives to improve brand recognition.
Recently, Burger King announced that it is set to unveil three restaurants in Martinique, an island in the eastern Caribbean Sea in an overseas region of France. The new restaurant launch is also part of the company’s brand-building efforts. In collaboration with its franchisee partner, ADM Food Services, these three restaurants are slated to open in Le Lamentin, Fort-de-France and Guadeloupe in April, September and December 2014, respectively.
Burger King intends to capitalize on ADM Food Services’ extensive knowledge of the local market to expand its flame-grilled hamburgers, chicken and other specialty sandwiches, French fries, soft drinks, and other food offerings in the market. It also plans to open four additional restaurants in the French Antilles by the end of 2015 in partnership with ADM Food Services. Moreover, it intends to work with the franchisee to set up the supply chain in Martinique, Guadeloupe and French Guyana to establish its restaurants across the territories over the next few months.
Burger King is looking to accelerate its presence in high-growth potential international markets mainly through franchising. Of late, the company has initiated ventures in key markets like Russia, China, Mexico, Central America, South Africa, Singapore, Malaysia, Korea and Vietnam.
We believe franchising a large chunk facilitates earnings and return on equity growth by reducing capital requirements. The company’s franchised business model allows it to generate strong free cash flow, thereby helping it to maintain a healthy balance sheet. Moreover, since a major portion of its business is franchised, Burger King is less likely to be affected by inflation compared to its peers.
This Zacks Rank #2 (Buy) company posted mixed fourth-quarter 2013 results in January with earnings beating the Zacks Consensus Estimate and revenues missing the same. However, driven by net restaurant growth and higher comps in the Europe, Middle East and Africa and Asia Pacific regions, organic revenues grew 5.2%.
Office Depot Falls to Strong Sell
On Mar 1, 2014, Zacks Investment Research downgraded Office Depot, Inc. (ODP-Free Report) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Office Depot has witnessed sharp downward estimate revisions over the last 7 days. The primary reason behind this was the company’s lackluster fourth-quarter 2013 performance. Notably, over the past few quarters, this office supplier retailer has not been performing up to the mark. The company delivered negative earnings surprises in the trailing four quarters with an average miss of 122.2%.   
The soft industry trends and severe competition from online giants have contributed to declining sales at Office Depot. The company recently merged with OfficeMax to capture incremental market share, streamline cost structure and compete better with industry peers.
On Feb 25, Office Depot posted adjusted fourth-quarter 2013 loss per share of 3 cents as against the Zacks Consensus Estimate of earnings of 3 cents and break-even results in the prior-year quarter. Revenues of $3,486 million also fell short of the Zacks Consensus Estimate but grew 33% year over year.  
Further, management foresees headwinds across product lines and distribution channels during 2014. As a result, the company projects total revenue to be lower than 2013 pro-forma combined sales while adjusted operating income is expected to be at least $140 million.
Given the uncertainties, analysts remain highly apprehensive, as reflected by the massive downward estimate revision. For 2014, the Zacks Consensus Estimate fell 60.7% to 11 cents per share while for 2015, it decreased 40% to 33 cents per share over the last 7 days.
Other Stocks to Consider
Not all retail stocks are performing as poorly as Office Depot. Some better-ranked stocks include Barnes & Noble, Inc. (BKS-Free Report), ITOCHU Corp. (ITOCY-Free Report) and Kingfisher plc (KGFHY-Free Report). Barnes & Noble and ITOCHU carry a Zacks Rank #1 (Strong Buy) while Kingfisher has a Zacks Rank #2 (Buy).
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