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Why Did Wendy’s Lower Its 2017 Earnings Guidance?

PART:
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Part 8
Why Did Wendy’s Lower Its 2017 Earnings Guidance? PART 8 OF 8

Analysts Lowered Their Target Price for Wendy’s

Target price

As of November 10, 2017, Wendy’s (WEN) was trading at $14.5. On the same day, analysts expected the company’s stock price to reach $16.32 in the next 12 months, which represents a return potential of 12.5%.

Analysts Lowered Their Target Price for Wendy&#8217;s

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The lower-than-expected 3Q17 earnings and management’s lower 2017 SSSG (same-store sales growth) and EPS (earnings per share) guidance appear to have compelled analysts to lower their target price. Before the announcement of the 3Q17 earnings, analysts forecast the 12-month target price to be at $16.71. Since the announcement of the 3Q17 earnings, SunTrust Robinson and Barclays have lowered their target price from $18 to $17, while BMO lowered its target price from $19 to $17. Morgan Stanley raised its target price from $16 to $17 after the announcement of the 3Q17 earnings.

The return potential of Wendy’s peers are as follows:

  • Restaurant Brands International (QSR) – target price of $72 with a return potential of 10.6%
  • McDonald’s (MCD) – target price of $175.41 with a return potential of 5.9%
  • Jack in the Box (JACK) – target price of $111.47 with a return potential of 11.5%

Analysts’ ratings

Of the 21 analysts that follow Wendy’s, 52.4% are recommending a “buy,” 47.6% are recommending a “hold,” and 4.8% are recommending a “sell.”

Wendy’s is trading below analysts’ target price. However, it doesn’t mean an automatic “buy.” Investors should analyze the various parameters that we discussed in this series before making any investment decisions.

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