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Analysts Expect Wendy’s EPS to Rise in 2Q17

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2Q17 estimates

In 2Q17, analysts are expecting Wendy’s (WEN) to post EPS (earnings per share) of $0.13, which represents an increase of 30% from $0.10 in 2Q16. The EPS growth is expected to be driven by the expansion of EBIT margins and share repurchases.

Between the beginning of 3Q16 and May 4, 2017, the company has repurchased shares worth $104.8 million. As of May 4, 2017, the company had $121 million under its share repurchase program. However, some of the EPS growth was offset by revenue declines and an increased effective tax rate. Analysts are expecting the company’s effective tax rate to be at 33.3% compared to 29.0% in 2Q16.

From the above graph, we can see that the company has outperformed analysts’ earnings estimate in all five quarters. When this happens, the stock price of the company tends to rise.

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Peer comparison

During the same period, McDonald’s (MCD) and Restaurant Brands International (QSR) posted EPS growth of 19.3%, and 24.4%, respectively. For 2Q17, analysts are expecting Jack in the Box’s (JACK) EPS to fall 0.6%.

For 2017, Wendy’s management has set its EPS guidance to be in the range of $0.45 to $0.47, which represents a year-over-year increase in the range of 13% to 18%. During the next four quarters, analysts are expecting Wendy’s to post EPS of $0.51, which represents growth of 24.4% from $0.41.

Dividends

On August 3, 2017, Wendy’s has announced a dividend of $0.07 per share at a dividend yield of 1.8%. For the next two quarters, analysts are expecting Wendy’s to pay dividends of $0.14 to take the total for 2017 to $0.28, which represents year-over-year growth of 12%.

Next, we will look at Wendy’s  valuation multiple.

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