Wendy's (WEN) AI Stock Analysis

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Wendy's

(NASDAQ:WEN)

Rating:66Neutral

Price Target:―

Wendy's overall stock score reflects its strong financial performance and valuation attractiveness, counterbalanced by high leverage and challenging market conditions. The bearish technical indicators and cautious earnings outlook further moderate the score, indicating a need for cautious optimism.

Positive Factors

Operational Improvements

The new Model of Excellence operational plan is expected to drive significant improvements in restaurant margins.

Shareholder Value

The company has significantly returned cash to shareholders through share repurchases, enhancing shareholder value.

Valuation Opportunity

Wendy’s current share price provides a value-oriented opportunity as significant upside to equity value is seen with 6-7% FCF yield with potential for this to step further up to 8.5%+ ex-funded franchise development.

Negative Factors

Consumer Spending Environment

Wendy's is perceived as less well-positioned for a tighter U.S. consumer spending environment compared to some of its quick-service peers.

Franchisee Economics

Deteriorating franchisees economics may impact future unit growth due to reduced restaurant margins and increased franchisees fees.

Guidance and Performance

Wendy's Company lowered its full-year guidance, implying potential challenges in maintaining market share amid competitive pressures.

Wendy's (WEN) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$2.35B

Dividend Yield8.61%

Average Volume (3M)5.07M

Price to Earnings (P/E)13.1

Beta (1Y)0.27

Revenue Growth2.18%

EPS Growth-5.15%

CountryUS

Employees4,833

SectorConsumer Cyclical

Sector Strength72

IndustryRestaurants

Share Statistics

EPS (TTM)0.20

Shares Outstanding192,025,250

10 Day Avg. Volume4,213,080

30 Day Avg. Volume5,071,932

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)18.58

Price to Sales (P/S)0.00

P/FCF Ratio9.47

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$14.84

Price Target Upside29.04% Upside

Rating ConsensusHold

Number of Analyst Covering20

Wendy's Business Overview & Revenue Model

Company DescriptionThe Wendy's Company, together with its subsidiaries, operates as a quick-service restaurant company. It operates through three segments: Wendy's U.S., Wendy's International, and Global Real Estate & Development. The company is involved in operating, developing, and franchising a system of quick-service restaurants specializing in hamburger sandwiches. As of January 2, 2022, it operated approximately 403 company-operated restaurants; 5,535 franchised restaurants in the United States; and 1,006 franchised restaurants internationally. The company also owns and leases real estate properties. It owns 485 and leases 1,235 properties, which are leased or subleased to franchisees. The company was formerly known as Wendy's/Arby's Group, Inc. and changed its name to The Wendy's Company in July 2011. The Wendy's Company was founded in 1969 and is headquartered in Dublin, Ohio.

How the Company Makes MoneyWendy's generates revenue primarily through its company-operated restaurants and franchise operations. The company earns money from sales at its directly owned locations, which account for a portion of its total revenue. A significant part of Wendy's income also comes from franchise fees and royalties, as the majority of its restaurants are franchised. These fees typically include initial franchise fees, ongoing royalties based on a percentage of sales, and revenue from leasing properties to franchisees. Additionally, Wendy's benefits from strategic partnerships and marketing initiatives that enhance brand visibility and drive sales across its global network.

Wendy's Key Performance Indicators (KPIs)

Any

Store Count by Type

Store Count by Type
Shows the number of different types of Wendy's locations, such as company-owned and franchised, highlighting expansion strategy and market penetration.

Chart InsightsWendy's is experiencing significant international expansion, with a notable increase in international franchised stores, aligning with their strategic focus on global growth. Despite a stable count of US company-operated locations, the US franchised store count has shown fluctuations, reflecting a challenging domestic market. The latest earnings call highlights international sales growth and new franchise commitments, contrasting with a cautious outlook for US operations due to a tough consumer environment. Wendy's remains committed to net unit growth and shareholder returns, signaling confidence in their long-term strategy despite near-term challenges.

Data provided by:

Main Street Data

Wendy's Financial Statement Overview

Summary

Wendy's exhibits consistent revenue growth and operational efficiency. However, high financial leverage and declining equity levels pose a risk. Stable cash flow generation is a positive, but the significant debt load raises concerns for long-term sustainability.

Income Statement

Positive

Wendy's has shown stable revenue growth over recent years, with Total Revenue increasing from $1.73 billion in 2021 to $1.93 billion in TTM (Trailing-Twelve-Months). However, there has been a slight decrease in Gross Profit Margin, from 35.8% in 2021 to 34.7% in TTM. The Net Profit Margin also saw minor fluctuations, from 6.8% in 2021 to 9.9% in TTM. Despite these fluctuations, the EBIT and EBITDA margins have been stable, indicating strong operational efficiency.

Balance Sheet

Positive

The company's balance sheet reveals a high Debt-to-Equity ratio of 31.3 in TTM, indicating significant leverage. Stockholders' Equity has been decreasing over time, which raises concerns about financial stability. The Equity Ratio also decreased to 2.6% in TTM, suggesting limited equity financing. These factors highlight a potential risk due to high leverage, despite the company's ability to maintain its asset base.

Cash Flow

Positive

Wendy's cash flow demonstrates consistent Operating Cash Flow, although there was a decrease from $355 million in 2024 to $340 million in TTM. Free Cash Flow has remained fairly stable, with a minor decline from $260 million in 2024 to $246 million in TTM. The Operating Cash Flow to Net Income Ratio remains strong, indicating effective cash conversion from earnings, but the high financing cash outflows suggest potential challenges in maintaining cash reserves.

TTM	Dec 2024	Dec 2023	Mar 2023	Mar 2022	Mar 2021
Breakdown
Income Statement		Total Revenue
1.93B	2.25B	2.18B	2.10B	1.90B	1.73B
	Gross Profit
669.42M	790.01M	776.47M	720.76M	698.26M	621.48M
	EBIT
283.21M	371.36M	381.98M	353.31M	366.96M	269.31M
	EBITDA
455.80M	554.23M	552.05M	535.55M	458.55M	416.91M
	Net Income Common Stockholders
191.60M	194.36M	204.44M	177.37M	200.39M	117.83M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
335.26M	450.51M	516.04M	745.89M	249.44M	306.99M
	Total Assets
4.92B	5.03B	5.18B	5.50B	5.10B	5.04B
	Total Debt
4.08B	4.09B	4.14B	4.28B	3.86B	3.68B
	Net Debt
3.74B	3.64B	3.62B	3.54B	3.61B	3.37B
	Total Liabilities
4.79B	4.78B	4.87B	5.03B	4.66B	4.49B
	Stockholders Equity
130.24M	259.35M	309.78M	465.72M	436.40M	549.60M
Cash Flow		Free Cash Flow
246.02M	260.92M	260.39M	174.36M	267.79M	215.39M
	Operating Cash Flow
340.74M	355.31M	345.42M	259.90M	345.77M	284.36M
	Investing Cash Flow
-129.98M	-129.31M	-86.55M	-77.78M	-154.67M	-68.25M
	Financing Cash Flow
-409.79M	-303.10M	-504.30M	288.67M	-242.74M	-157.91M

Wendy's Technical Analysis

Technical Analysis Sentiment

Negative

Last Price11.50

Price Trends

50DMA

13.27

Negative

100DMA

14.09

Negative

200DMA

15.71

Negative

Market Momentum

MACD

-0.37

Negative

RSI

33.36

Neutral

STOCH

26.86

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WEN, the sentiment is Negative. The current price of 11.5 is below the 20-day moving average (MA) of 12.20, below the 50-day MA of 13.27, and below the 200-day MA of 15.71, indicating a bearish trend. The MACD of -0.37 indicates Negative momentum. The RSI at 33.36 is Neutral, neither overbought nor oversold. The STOCH value of 26.86 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WEN.

Wendy's Risk Analysis

Wendy's disclosed 34 risk factors in its most recent earnings report. Wendy's reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Wendy's Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DPZ	77 Outperform	$16.89B	28.27	-14.74%	1.30%	4.28%	13.76%
DRI	75 Outperform	$24.23B	23.36	48.22%	2.70%	5.00%	3.73%
MCD	74 Outperform	$228.67B	28.21	-216.57%	2.17%	-0.22%	-3.83%
WING	70 Outperform	$9.15B	54.99	-16.09%	0.31%	30.98%	112.65%
YUM	67 Neutral	$41.43B	29.71	-19.43%	1.82%	10.09%	-11.50%
WEN	66 Neutral	$2.35B	13.07	90.40%	8.61%	2.18%	-5.15%
Sector *	62 Neutral	$6.88B	11.26	2.78%	3.93%	2.65%	-22.00%

* Consumer Cyclical Sector Average

Performance Comparison

WEN

Wendy's

11.50

-5.26

-31.38%

DRI

Darden Restaurants

203.88

61.11

42.80%

DPZ

Domino's Pizza

482.26

-12.93

-2.61%

MCD

McDonald's

314.31

62.50

24.82%

YUM

Yum! Brands

145.50

11.13

8.28%

WING

Wingstop

321.14

-58.60

-15.43%

Wendy's Earnings Call Summary

Earnings Call Date:May 02, 2025

(Q1-2025)

% Change Since: -7.93%|

Next Earnings Date:Aug 06, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with significant international growth and technological advancements, while facing challenges such as declining same restaurant sales and a tough consumer environment in the U.S. The updated financial outlook reflects these challenges, indicating a cautious stance for the remainder of 2025.

Q1-2025 Updates

Positive Updates

International Sales Growth

Internationally, same restaurant sales grew by 2.3% and system-wide sales grew by 8.9%.

New Restaurant Openings

Opened 74 new restaurants globally, with over 60% of these openings occurring internationally.

Technology and Customer Engagement

Digital mix reached a record of over 20% of total sales, with enhanced app engagement metrics, including an all-time high in conversion rate.

Shareholder Returns

Returned more than $173 million to shareholders through dividend and share repurchases in the first quarter.

Franchisee Growth Commitments

Signed agreements for 25 new restaurants in Guadalajara, Mexico, and 30 more restaurants in Chile.

Negative Updates

Decline in Same Restaurant Sales

Global same restaurant sales declined by 2.1%, driven by a 2.8% decline in the U.S. due to weather and consumer environment challenges.

Global Systems Sales Decline

Global systems sales decreased by 1.1% on a constant currency basis.

Challenged Consumer Environment

The consumer confidence deteriorated in March, leading to a reduction in demand.

Updated Financial Outlook

Full-year global system wide sales are now expected to be flat to down 2%, with adjusted EBITDA between $530 million and $545 million.

U.S. Company Restaurant Margin Contraction

U.S. company-operated restaurant margin contracted by 50 basis points year-over-year.

Company Guidance

During the fiscal 2025 first quarter earnings call, Wendy's provided guidance for the year, emphasizing a cautious outlook given the challenging consumer environment. The company updated its full-year expectations, projecting global system-wide sales to be flat to down 2%, adjusted EBITDA between $530 million and $545 million, and adjusted EPS of $0.92 to $0.98. Despite the anticipated headwinds, Wendy's reaffirmed its commitment to achieving 2% to 3% net unit growth in 2025. The company also highlighted its strategic initiatives to drive long-term growth, including a focus on operational excellence, customer experience, and innovation through collaborations like the Thin Mint Frosty and upcoming Takis partnerships. Additionally, Wendy's plans to return approximately $325 million to shareholders through dividends and share repurchases in 2025, an increase of up to $40 million compared to 2024.

Wendy's Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Wendy’s Appoints Ken Cook as New CFO

Positive

Nov 18, 2024

The Wendy’s Company has announced the appointment of Ken Cook as its new Chief Financial Officer, effective December 2, 2024. With a robust 20-year background at UPS, Cook is set to enhance Wendy’s growth trajectory by driving operational performance and boosting restaurant profitability. This transition marks a significant step as Wendy’s aims to unlock shareholder value and expand globally, following the contributions of outgoing CFO Gunther Plosch.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.