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Why Wendy’s Stock Rose after 4Q17 Earnings Release

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Feb. 26 2018, Published 11:37 a.m. ET

4Q17 performance

Wendy’s (WEN) posted its 4Q17 earnings after the market closed on February 21, 2018. It reported adjusted EPS (earnings per share) of $0.11 on revenues of $309.3 million. Compared to 4Q16, EPS has risen by 37.5%, while its revenue has fallen 0.2%.

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Stock performance

Analysts were expecting Wendy’s to post EPS of $0.11 on revenues of $313.5 million. Despite lower-than-expected 4Q17 sales, the stock rose on a positive outlook. Management has set 2018 EPS guidance at $0.54–$0.56, which represents a growth of 25.6%–30.2% from $0.43 in 2017. Optimism surrounding the expansion of its delivery service, the implementation of technological advancements, and image activation could have also contributed to a rise in Wendy’s stock. As of February 23, 2018, Wendy’s was trading at $16.88, which represents a growth of 4.1% since the announcement of its 4Q17 earnings.

Year-to-date performance

Last year was good for Wendy’s, with its stock price increasing 21.4%. Since the beginning of 2018, the stock has risen 2.8%. During the same period, McDonald’s (MCD), Jack in the Box (JACK), and Restaurant Brands International (QSR) have fallen 5.3%, 9%, and 3.3%, respectively. The broader comparative indexes, the S&P 500 Index (SPX-INDEX) and the Consumer Discretionary Select Sector SPDR ETF (XLY), have risen 2.8% and 7.3%, respectively, year-to-date.

Series overview

In this series, we’ll analyze Wendy’s 4Q17 earnings by comparing them with analysts’ estimates. We’ll also look at analysts’ estimates and management’s guidance for 2018. Finally, we’ll look at the company’s valuation multiple and analysts’ recommendations.

Let’s start by looking at Wendy’s 4Q17 revenue.

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