Analysis of Wendy’s EBITDA
So far in this series, we’ve covered Wendy’s (WEN) revenues, same-store sales growth, unit growth, and expectations in the upcoming earnings, which will be announced on February 3.
Wall Street analysts have estimated Wendy’s EBITDA (earnings before interest, taxes, depreciation, and amortization) for the fourth quarter at $102 million compared to $90 million a year ago in the corresponding quarter.
Wendy’s EBITDA margins are expected to increase to 20.3% year-over-year from 15.2%. Sequentially, the margins are expected to increase from 16.2% in the previous quarter.
EBITDA is the purest measure of a company’s revenue performance for any given financial period. Interest, depreciation, and amortization can vary a lot among companies, so EBITDA helps compare and analyze how profitable companies are by eliminating these charges. In other words, using EBITDA helps compare companies apples to apples.
Panera Bread (PNRA) has an EBITDA margin of 11.9%. McDonald’s (MCD) has an EBITDA margin of -2.3%. Yum! Brands (YUM), which operates KFC, Pizza Hut, and Taco Bell, has an EBITDA margin of -4%. Darden Restaurants (DRI), which has casual dining restaurants, has an EBITDA margin of 6.1%.
EBITDA margin can vary based on the business model and depending upon the breakup between the company’s business from the company-operated model and the franchise model.
A few of the above names are held by the Consumer Discretionary Select Sector SPDR ETF (XLY).
In the next part, we’ll sum up the series with what to look for in Wendy’s (WEN) upcoming earnings release.