Wendy’s (NASDAQ:WEN) Releases Quarterly Earnings Results, Beats Expectations By $0.04 EPS

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

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

NASDAQ:WEN traded up $0.29 during trading hours on Thursday, reaching $7.94. 12,069,191 shares of the company’s stock were exchanged, compared to its average volume of 10,958,167. Wendy’s has a 1-year low of $5.94 and a 1-year high of $10.12. The company has a quick ratio of 1.88, a current ratio of 1.90 and a debt-to-equity ratio of 27.95. The firm has a market capitalization of $1.51 billion, a price-to-earnings ratio of 12.03, a P/E/G ratio of 1.33 and a beta of 0.37. The company has a 50-day moving average of $6.97 and a 200 day moving average of $7.37.

Wendy’s Cuts Dividend

The firm also recently declared a quarterly dividend, which was paid on Tuesday, September 15th. Investors of record on Tuesday, September 1st were paid a dividend of $0.07 per share. The ex-dividend date was Tuesday, September 1st. This represents a $0.28 dividend on an annualized basis and a yield of 3.5%. This is a decrease from Wendy’s’s previous quarterly dividend of $0.14. Wendy’s’s dividend payout ratio (DPR) is currently 42.42%.

Analyst Upgrades and Downgrades

Several equities research analysts recently commented on WEN shares. Citigroup cut their price target on shares of Wendy’s from $8.25 to $6.75 and set a “neutral” rating on the stock in a research note on Friday, October 23rd. Stephens dropped their price objective on Wendy’s from $8.00 to $7.00 and set an “equal weight” rating on the stock in a report on Thursday, October 15th. Guggenheim reaffirmed a “neutral” rating on shares of Wendy’s in a report on Tuesday, September 15th. TD Cowen reiterated a “hold” rating and set a $6.00 target price on shares of Wendy’s in a research report on Wednesday, October 28th. Finally, KeyCorp reissued a “sector weight” rating on shares of Wendy’s in a report on Tuesday, August 11th. One analyst has rated the stock with a Buy rating, eleven have given a Hold rating and six have given a Sell rating to the company. According to data from MarketBeat.com, the company presently has an average rating of “Reduce” and an average target price of $7.42.

Trending Headlines about Wendy’s

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

• Positive Sentiment: Wendy’s reported third-quarter earnings of $0.13 per share, above the $0.09 consensus estimate. It also introduced Dave’s Way, a multi-year plan to increase customer traffic and market share while improving restaurant profitability. Wendy’s Q3 earnings results
• Positive Sentiment: The company plans to acquire as many as 163 Meritage Hospitality Group restaurants, subject to a definitive agreement and other approvals. The deal could expand Wendy’s company-operated footprint, though it is not final. Wendy’s Meritage acquisition plan
• Neutral Sentiment: The board rejected a $7.35-per-share cash proposal from a Trian-led investor group, saying it undervalued Wendy’s and its turnaround potential. A shareholder-rights plan (“poison pill”) adds protection against a hostile takeover, but the rejection also removes a near-term cash-exit option for shareholders and leaves the outcome of any further bid uncertain. Wendy’s rejects Trian-led offer
• Negative Sentiment: Despite beating estimates, quarterly EPS was down from $0.24 a year earlier, and reports highlight continuing sales and customer-traffic challenges. The turnaround—including making breakfast offerings location-specific and refreshing menu items—will need to deliver sustained improvement. Wendy’s turnaround and sales challenges

About Wendy’s

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.