Wendy’s Posts Better-Than-Expected Q4 Results

Wendy’s (WEN) has delivered upbeat fourth-quarter results, as both revenue and earnings beat expectations. The company engages in operating, developing, and franchising a system of quick-service restaurants.

Revenue was down marginally year-over-year to $473.2 million but surpassed consensus estimates of $460.5 million. However, excluding the impact of the 53rd operating week, revenues climbed on the back of a rise in franchise fees, advertising funds and franchise royalty revenue, leading to higher sales at restaurants.

Furthermore, adjusted earnings per share (EPS) stood at $0.16, down 5.9% year-over-year but above analysts’ estimates of $0.15 per share. Adjusted EBITDA was down 10.3% against the same quarter last year to $102.7 million.

Company-operated restaurant margin fell 3.1% to 14.5% during the quarter. The decline was primarily due to higher commodity costs, labor rate increases and higher insurance costs.

Wendy’s President and CEO, Todd Penegor, said, “In 2022, we are planning to deliver another year of accelerated growth across our three long-term growth pillars: significantly building our breakfast daypart, accelerating our digital business, and expanding our footprint across the globe.”

Capital Deployment Activity

Having completed all its previously announced buyback authorizations, Wendy’s disclosed that its board of directors have approved a new $100 million share repurchase authorization, expiring in February 2023.

Outlook

Wendy’s expects global systemwide sales to grow between 6% and 8% in 2022. Adjusted EBITDA is expected to be between $490 million and $505 million. Further, adjusted EPS is likely to range from $0.87 to $0.91 for the year.

Stock Rating

Following the results, Stifel Nicolaus analyst Chris O`Cull reiterated a Hold rating on WEN with a price target of $25, implying 10.1% upside potential to current levels.

O`Cull said, “We continue to be impressed with Wendy’s SRS and store-level margin performance. However, we remain Hold rated pending better visibility that the company’s non-traditional unit expansion plans can deliver a sustained increase in top-line growth.”

Consensus among analysts is a Hold based on 2 Buys, 5 Holds and 1 Sell. Wendy’s stock price prediction of $26 implies 14.5% upside potential to current levels. Shares have gained 8.8% over the past year.

News Sentiment

News Sentiment for Wendy’s is Very Positive based on 13 articles over the past seven days. All the articles have Bullish sentiment, compared to a sector average of 61%, and none have Bearish Sentiment, compared to a sector average of 39%.

Download the TipRanks mobile app now

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Read full Disclaimer & Disclosure