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Why Has Wendy’s Stock Price Been Declining Since Its 1Q16 Results?

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Jun. 30 2016, Published 2:45 p.m. ET

Stock performance

Wendy’s Company (WEN) is a Dublin, Ohio-based fast food company that serves hamburgers. Since the announcement of its 1Q16 results on May 11, 2016, the share price of WEN has declined by more than 15%.

Although the 1Q16 results were in line with the expectation, Wendy’s management warned its investors that its same-store sales growth in the second quarter could be lower than company’s guidance of 3%. This led investors to move away from the stock, which caused the share price to decline by 8.9% by the end of the announcement day on May 11, 2016. Continuing this downward momentum, WEN was trading at $9.5, 15.3% lower than its May 10, 2016, price of $11.2.

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Peer comparisons

During the same period from May 10, 2016, to June 28, 2016, Jack in the Box (JACK) returned 23.6%, while the share price of McDonald’s (MCD), and Restaurant Brands International (QSR) declined by 9.2%, and 3%, respectively.

By comparison, the share price of the broader comparative index, the SPDR Dow Jones Industrial Average ETF (DIA), has declined by 1.4%. DIA has over 45.2% of its holdings in restaurants and travel companies.

Series overview

In this series, we’ll discuss analyst revised estimates for Wendy’s revenue, same-store sales growth, EBIT (earnings before interest and tax) margins, earnings per share, and valuation multiple. Finally, we’ll look at what analysts are recommending as well as their target prices over the next 12 months.

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