Earnings expectations

For the next four quarters, analysts expect Wendy’s (WEN) to post EPS (earnings per share) of $0.52, which represents 26.8% growth from its EPS of $0.41 in the last four quarters.

Why Analysts Expect Wendy’s Earnings to Rise

The EPS growth is expected to be driven by revenue growth, EBIT (earnings before interest and tax) margin expansion, lower effective tax rates, and share repurchases. Analysts expect Wendy’s EBIT margins to improve from 22.2% in the last four quarters to 24.6% in the next four quarters. The expansion is expected to be driven by lower costs of goods sold and SG&A (selling, general, and administrative) expenses, and increased revenue from franchised restaurants. The cost of goods is expected to fall from 44.9% of total revenue to 41.9%, while SG&A expenses are expected to fall from 17.8% to 16.0% of total revenue.

In the last four quarters, Wendy’s has repurchased 11.5 million shares for $145.3 million, and by the end of 3Q17, the company had approximately $59 million under its share repurchase program. Share repurchases drive the company’s EPS by lowering the number of shares outstanding.

Management’s guidance

After Wendy’s posted its 3Q17 results, management lowered its 2017 guidance to $0.43–$0.45 from $0.45–$0.47.

Peer comparison

In the next four quarters, analysts expect McDonald’s (MCD), Jack in the Box (JACK), and Restaurant Brands International (QSR) to post EPS growth of 6.7%, 14.7%, and 30.7%, respectively. Next, we’ll look at analysts’ recommendations.

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