Can Wendy’s Fist-Quarter EPS Beat Wall Street Expectations?



Analysts’ EPS expectations

Analysts expect Wendy’s (WEN) to post adjusted EPS of $0.12 in the first quarter of 2019, which represents a rise of 4.1% from $0.11 per share in the first quarter of 2018. The revenue growth, expansion of its EBIT margin, lower interest expenses, and share repurchases are expected to drive the company’s EPS in the first quarter.

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Analysts project that Wendy’s EBIT margin will improve from 15.4% from the first quarter of 2018 to 16.0%. Sales leverage from positive SSSG (same-store sales growth) and initiatives to improve productivity are likely to drive the company’s EBIT margin, partially offset by labor wage inflation and higher commodity prices.

For the quarter, analysts expect the company’s effective tax rate at 22.1%, compared to 5.8% in the first quarter of 2018. The higher effective tax rate is likely to offset some growth in EPS.

From the beginning of the second quarter to the end of the fourth quarter of 2018, the company has repurchased 14.5 million shares for $252.4 million. By the end of the fourth quarter, the company had authorization to repurchase shares worth $147.4 million.

Peer comparisons and outlook

During the comparable quarter, Restaurant Brands International’s (QSR) EPS have declined 16.7% while analysts expect Jack in the Box (JACK) and McDonald’s (MCD) to post EPS growth of 17.0% and -2.1%, respectively.

For 2019, analysts expect Wendy’s to post EPS of $0.62, which represents growth of 4.3% from $0.59 in 2018. Revenue growth and share repurchases are expected to drive the company’s EPS in 2019 while a decline in EBIT margin and a higher effective tax rate are expected to lower the company’s EPS in 2019. Management expects EPS to rise in the range of 3.5%–7.0% during the period.


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