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How Much Upside Is Left in Wendy’s Stock Price?

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Dec. 29 2016, Published 10:54 a.m. ET

Stock performance

After posting strong 3Q16 earnings on November 9, 2016, Wendy’s (WEN) stock is on an upward momentum. As of December 27, 2016, WEN stock was trading at $13.83, which is a rise of 24.3% since the announcement of its 3Q16 earnings.

Analysts were expecting Wendy’s to post adjusted EPS (earnings per share) of $0.10 on revenues of $349.4 million. The company outperformed analysts’ estimates by posting EPS of $0.11 on revenues of $364.0 million. The company’s strong 3Q16 earnings and improvement in margins could have compelled management to raise its EPS guidance for fiscal 2016.

The company’s higher EPS guidance appears to have increased investor confidence, leading to a rise in WEN stock. The stock also got a boost from Donald Trump’s victory in the US presidential election. Investors expect Trump to loosen regulations, which could be beneficial for restaurant chains.

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Year-to-date performance

Year-to-date, Wendy’s stock has risen 29.6%. During the same period, McDonald’s (MCD), Jack in the Box (JACK), and Restaurant Brands International (QSR) have risen 4.7%, 48.6%, and 34.6%, respectively.

The broader comparative index, the iShares US Consumer Services (IYC), has fallen 8.0% since the beginning of 2016. IYC invests 12.0% of its holdings in restaurant and travel companies.

Series overview

In this series, we’ll see how Wendy’s strong 3Q16 earnings have affected analysts’ revenue and EPS estimates for the next four quarters. Finally, we’ll look at the company’s valuation multiple and analysts’ recommendations for the next 12 months.

Let’s start by looking at analysts’ revenue estimates for the next four quarters.

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