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Pro Analysis

Sell Dunkin' Brands shares on McDonald's, 7-11 competition, Goldman says

An employee fills a coffee order at a Dunkin' Donuts location in Ramsey, NJ.
Ron Antonelli | Bloomberg | Getty Images
An employee fills a coffee order at a Dunkin' Donuts location in Ramsey, NJ.

Investors should shed shares of Dunkin' Brands due to lackluster growth and the increasingly promotional environment, according to Goldman Sachs, which downgraded the Dunkin' Donuts and Baskin-Robbins parent to sell from neutral.

"We believe top-line risks at US DD (both comps and unit growth) present downside risk to a stock trading at the high end of its valuation range," analyst Karen Holthouse wrote in a note to clients Wednesday.

Holthouse lowered her 2017 comparable sales growth forecast for the company to up 1 percent from up 1.7 percent. She cited concerns that the food retailer was overly exposed to the harsh weather of the Northeast this winter, saying 55 percent of Dunkin' Brands locations were geographically affected compared with the 20 percent average for the companies she covers.

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