Why Investors Are Optimistic about Wendy’s Q4 Results



Stock performance

Wendy’s (WEN) is scheduled to post its fourth-quarter earnings results before the market opens on February 21. On February 15, Wendy’s was trading at $18.0, a rise of 5.4% since its announcement of its third-quarter earnings results on November 6.

In the third quarter, Wendy’s posted adjusted EPS of $0.17, outperforming analysts’ expectation of $0.15. However, its SSSG (same-store sales growth) and revenue fell short of analysts’ expectations. The company’s SSSG fell 0.2%, whereas analysts had expected a rise of 1.7%.

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The lower-than-expected revenue and weakness in the broader equity market led the company’s stock price to fall to a low of $14.96 on December 26. Since then, the company’s stock price has risen 20.3%. The strengthening of the broader equity market and the upgrading of the stock by Oppenheimer on January 9 appear to have led to a rise in its price.

Year-to-date performance

After losing 4.9% of its stock value in 2018, Wendy’s has started 2019 on a strong note, with its stock price rising 15.3% YTD (year-to-date) as of February 15. During the same period, its peers Jack in the Box (JACK), McDonald’s (MCD), and Restaurant Brands International (QSR) have returned 3.4%, 1.4%, and 23.7%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), which invests ~8.4% of its holdings in restaurant and travel companies, has returned 11.2% YTD.

Series overview

With Wendy’s fourth-quarter earnings around the corner, in this series, we’ll take a look at analysts’ revenue and EPS expectations for the company in the quarter. We’ll also cover management’s guidance for 2019. We’ll end this series by looking at analysts’ recommendations and Wendy’s valuation multiple. First, let’s look at analysts’ revenue expectations for the company.


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