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Why This Stock May Be Hot And Juicy

For three years, AFC Enterprises (AFCE) has been on a chilling roller-coaster ride. Now it's drawing attention as a turnaround play as it focuses on its 1,500-restaurant Popeyes Chicken & Biscuits chain to rebuild financial muscle. After hiring KPMG in 2003 to replace Arthur Andersen as its auditor, AFC restated 2001 and 2002 earnings and sold its Seattle's Best Coffee unit to Starbucks (SBUX). In 2004 it unloaded two other eatery chains -- Cinnabon and Church's Chicken. Since then, AFC has popped -- from 18 in August to 26 on Feb. 23.

Steven M. Cohen, chief investment officer at Kellner Dileo Cohen, which owns shares, says AFC is starting to cook: It has a new management team, and with cash of $300 million, may pay off its $98 million debt, add more Popeyes units -- and deliver a dividend. Cohen sees the stock hitting 33 in a year. He expects net of $1.50 to $1.75 in 2006, up from an estimated $1.24 in 2005, vs. a loss in 2004. Michael Gallo of investment firm CL King & Associates rates the stock a strong buy.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

By Gene G. Marcial

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