6 Nov

Wendy’s Stock Rose Due to Q3 Beat, Unlike Peers

  • Wendy’s third-quarter sales and EPS beat analysts’ estimates.
  • Wendy’s stock rose more than 4% due to the third-quarter beat.
  • The company raised its EPS outlook.

Wendy’s (WEN) stock was trading more than 4% higher in the pre-market session. Today, the company posted stronger-than-expected third-quarter results. The company’s revenues and earnings beat analysts’ estimates due to higher sales at company-operated stores and margin expansion.

Management lifted the fiscal EPS outlook due to solid third-quarter financials. Wendy’s expects its adjusted EPS to fall 1.5% or increase 1.5%. Earlier, management expected a decline of 3.5%–6.5%.

Wendy’s stock rose after its better-than-expected third-quarter performance and upbeat outlook.

Notably, Shake Shack (SHAK), Chipotle Mexican Grill (CMG), and McDonald’s (MCD) shares fell after their third-quarter earnings. Chipotle announced stellar revenues and earnings growth in the third quarter. The company’s quarterly sales and EPS also beat analysts’ expectations. However, investors punished the stock due to news about a delay in new store openings.

Shake Shack’s revenues and EPS continued to grow at a breakneck pace. However, the stock closed more than 20% lower. The company missed the sales estimate and lowered its same-store sales growth outlook. Shake Shack’s management reduced the comps growth guidance to 1.5% from 2.0%.

McDonald’s didn’t have an impressive third-quarter performance. The company’s revenues and EPS were below analysts’ expectations. To add to the pain, McDonald’s CEO left the company due to a relationship with an employee. The exit pressured McDonald’s stock.

Wendy’s Q3 earnings 

Wendy’s posted total revenues of $437.9 million, which implies a YoY (year-over-year) increase of 9.3%. The company’s revenues beat analysts’ estimate of $434.7 million. Increased sales at company-operated restaurants and higher franchise royalty revenues drove the top line.

Higher same-restaurant sales or comps and an increase in the number of restaurants supported growth at company-operated restaurants. The comps in North America rose 4.4%.

Company-operated restaurant margins benefited from higher pricing and a favorable mix. However, increased labor commodity costs remained a drag. Higher margins and growth in franchise royalty revenues drove the operating income.

Wendy’s posted an adjusted EPS of $0.19, which increased 12% YoY and beat analysts’ estimate of $0.17. Improved sales, better margins, and a lower outstanding share count drove Wendy’s bottom line. Meanwhile, lower taxes cushioned the company’s earnings.

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