On Thursday, Stifel, a financial services firm, adjusted its price target for Wendy's (NASDAQ:WEN), reducing it to $18 from the previous $19. Despite this change, the firm maintained its Hold rating on the stock. Wendy's third-quarter earnings per share (EPS) matched the consensus of Wall Street estimates at $0.25, although it was slightly below Stifel's expectation of $0.26. The company's global comparable sales (comps) were also lower than anticipated, registering at 0.2% compared to Stifel's projection of 1.1% and the Street's 1.4%.
The company has revised its full-year guidance, narrowing its system-wide sales growth forecast to approximately 3%, a decrease from the previously estimated range of 3%-5%. Adjusted EPS expectations have also been tightened to a range of $0.99-$1.01, slightly adjusted from the former $0.98-$1.02 projection. Global comparable sales are now expected to be between 1%-2%, a modest change from the 1%-3% previously forecasted.
Wendy's has seen a significant uptick in comp trends at the onset of the fourth quarter, attributed to the successful introduction of the Krabby Patty Kollab in early October. However, according to mobile location data observed by Stifel, the initial surge in growth has leveled off, with the trend normalizing after the second week following the product launch.
Looking ahead, Wendy's anticipates closing a substantial number of units in the fourth quarter, predominantly U.S. franchise stores that have lower average unit volumes (AUVs) and margin contributions. Consequently, the company does not expect net unit growth for the fiscal year 2024. Despite this, Wendy's is confident in achieving a 3-4% growth rate in the fiscal year 2025.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Wendy's financial position and market performance. The company's market capitalization stands at $3.88 billion, with a P/E ratio of 19.56, indicating that investors are willing to pay a premium for Wendy's earnings. This is further supported by an InvestingPro Tip noting that Wendy's is trading at a high P/E ratio relative to its near-term earnings growth.
On a positive note, Wendy's has demonstrated strong recent market performance, with InvestingPro data showing a 15.92% price total return over the past month and an impressive 21.76% return over the last three months. This aligns with the InvestingPro Tip highlighting Wendy's strong returns over recent periods.
For income-focused investors, it's worth noting that Wendy's offers a dividend yield of 4.92% and has maintained dividend payments for 22 consecutive years, according to another InvestingPro Tip. This consistent dividend history may provide some reassurance to shareholders despite the recent downward revision in earnings estimates mentioned in the article.
InvestingPro offers 10 additional tips for Wendy's, providing further insights for investors considering the stock in light of the recent analyst adjustments and company guidance.
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