Wendy’s (NASDAQ:WEN) Posts Earnings Results

Wendy’s (NASDAQ:WEN) announced its earnings results on Thursday. The restaurant operator reported $0.13 earnings per share for the quarter, beating analysts’ consensus estimates of $0.09 by $0.04, FiscalAI reports. Wendy’s had a net margin of 5.72% and a return on equity of 115.31%. The business had revenue of $435.62 million during the quarter, compared to the consensus estimate of $531.28 million. During the same quarter last year, the firm earned $0.24 earnings per share. The business’s revenue for the quarter was down .5% on a year-over-year basis.

Here are the key takeaways from Wendy’s’ conference call:

• U.S. same-restaurant sales fell 5.7% in Q3, with traffic down 11.9%; adjusted EBITDA declined $24.6 million year over year to $113.4 million. Sales trends improved 130 basis points sequentially, but management said results remain unsatisfactory.
• Wendy’s made breakfast optional for U.S. restaurants, saying franchisees can exit unprofitable locations and focus resources on other dayparts. The company estimates the change could add up to $200 million in restaurant-level EBITDA across company and franchise restaurants.
• Delivery tests generated low-double-digit to 20% sales lifts, and more than 90% of U.S. franchise restaurants are now participating in delivery promotions. Management also cited early improvement in sales trends during Q3 and into Q4, while cautioning that the turnaround is still in its early stages.
• International systemwide sales grew 3.5%, with 30 new restaurants opened in Q3 and 84 opened year to date through the quarter. Management highlighted continued international development opportunities, while noting same-restaurant sales weakness in Canada.
• Wendy’s ended the quarter with about $413 million in cash and net debt leverage of 5.2x, and expects leverage to remain elevated in the near term. Free cash flow through the first three quarters was $174.2 million, down $21.4 million year over year.

Wendy’s Stock Performance

WEN stock opened at $7.94 on Friday. The stock’s 50 day simple moving average is $6.95 and its 200 day simple moving average is $7.36. The company has a current ratio of 1.90, a quick ratio of 1.88 and a debt-to-equity ratio of 27.95. Wendy’s has a 12-month low of $5.94 and a 12-month high of $10.12. The stock has a market capitalization of $1.51 billion, a PE ratio of 12.03, a price-to-earnings-growth ratio of 1.40 and a beta of 0.37.

Wendy’s Announces Dividend

The firm also recently disclosed a quarterly dividend, which will be paid on Tuesday, December 15th. Investors of record on Tuesday, December 1st will be given a $0.07 dividend. The ex-dividend date of this dividend is Tuesday, December 1st. This represents a $0.28 annualized dividend and a yield of 3.5%. Wendy’s’s dividend payout ratio is 42.42%.

Analysts Set New Price Targets

A number of research firms recently weighed in on WEN. Seaport Research Partners started coverage on Wendy’s in a research note on Wednesday, September 16th. They set a “neutral” rating for the company. BMO Capital Markets reissued a “market perform” rating on shares of Wendy’s in a research note on Friday. UBS Group cut their target price on Wendy’s from $8.00 to $6.50 and set a “neutral” rating on the stock in a research note on Monday, October 26th. Guggenheim restated a “neutral” rating on shares of Wendy’s in a report on Tuesday, September 15th. Finally, Argus lowered Wendy’s from a “buy” rating to a “sell” rating in a research report on Thursday, October 29th. One research analyst has rated the stock with a Buy rating, eleven have given a Hold rating and six have assigned a Sell rating to the company’s stock. Based on data from MarketBeat, the stock currently has a consensus rating of “Reduce” and a consensus price target of $7.48.

Key Stories Impacting Wendy’s

Here are the key news stories impacting Wendy’s this week:

• Positive Sentiment: Wendy’s reported third-quarter earnings per share of $0.13, above analysts’ $0.09 estimate. Management also introduced its multi-year “Dave’s Way” plan to improve traffic, market share and restaurant profitability. Wendy’s rejects buyout offer and tops Q3 expectations
• Positive Sentiment: Management says making breakfast an option by location improved profitability in tests. Wendy’s also sees potential for breakfast to add up to $200 million in restaurant-level EBITDA as its turnaround advances. Wendy’s outlines breakfast optionality
• Neutral Sentiment: Stephens raised its price target from $7 to $8 but kept an “equal weight” rating, implying only modest upside from the cited $7.94 share price.
• Neutral Sentiment: Wendy’s is considering acquiring as many as 163 Meritage-operated restaurants. The deal could support its portfolio strategy, but remains subject to a definitive agreement and other conditions. Wendy’s to acquire up to 163 Meritage locations
• Negative Sentiment: The earnings beat came amid ongoing pressure on sales and earnings: reported revenue was below the estimate cited in the results coverage, and earnings were down from $0.24 per share a year earlier. The turnaround’s success is not yet established. Wendy’s Q3 earnings results
• Negative Sentiment: The board rejected a $7.35-per-share buyout proposal from a group led by Trian and adopted a limited-duration shareholder rights plan. That removes the current offer as a potential near-term exit and could prolong uncertainty around a takeover campaign. Wendy’s rejects Trian-led buyout offer

Wendy’s Company Profile

The Wendy’s Company (NASDAQ: WEN) operates and franchises quick-service restaurants under the Wendy’s brand. Its restaurants are known for hamburgers made with fresh, never-frozen beef, along with chicken sandwiches, salads, fries, breakfast items, desserts, and beverages.

Founded by Dave Thomas in 1969, Wendy’s has grown into an international restaurant chain with locations primarily in the United States and Canada, as well as select markets in other countries. The company’s restaurant system includes both company-operated and franchised locations.

In addition to its restaurant operations, Wendy’s supports customers through digital ordering, delivery, loyalty programs, and mobile applications.