Wendy's (WEN) on Wednesday reported strong third-quarter earnings and raised its full-year forecasts, sending Wendy's stock up near a buy point.
XWendy's Earnings
Estimates: Wall Street expected Wendy's earnings per share to fall 12% to 15 cents. Revenue for the burger chain is seen rising 8.5% to $435 million. Consensus Metrix forecasts same-store sales gains of 4.4%.
Results: EPS of 19 cents on revenue of $437.9 million, as same-store sales grew 4.4%.
In October, during Wendy's investor day, the company said preliminary same-store sales for North America rose 4.4% for the quarter.
Wendy's 4 for $4 deal helped drive traffic and repeat customers, Stephens analyst Will Slabaugh said in a research note recapping the investor day. Its $5 Biggie Bag, another value meal, helped boost sales and profits. The company also brought back Spicy Chicken Nuggets during the quarter.
Outlook: Wendy's now sees full-year EPS down 1.5% to up 1.5% vs. a prior view of down 3.5%-6.5%, on revenue growth of 3.5%-4% vs. a prior view of 3%-4%. Management backed its 2020 revenue target of $12 billion-$12.5 billion.
Wendy's previously has targeted global sales growth of around 4%-5% for 2021 to 2024.
Wendy's Stock
Wendy's stock rose 3.9% to 21.65 in the stock market today. The stock is in a cup-with-handle base with a 22.03 buy point.
Prior to the earnings, Wendy's stock ratings had held up where other quick-service restaurants have stumbled. The stock has an 89 Composite Rating. Its EPS Rating, a barometer of profit growth, is a strong 95.
Elsewhere, McDonald's (MCD) edged up 0.2% early Wednesday. The stock has taken a hit in recent weeks, following disappointing quarterly earnings and the ouster of CEO Steve Easterbrook.
Shake Shack (SHAK), which fell after reporting weak same-store sales and cutting its same-store sales forecast, rose 1%. On Tuesday, shares dived 21%.
Breakfast Launch
Wendy's stock, however, took a hit in September when it cut its full-year profit forecast, thanks to a $20 million investment intended to help get nationwide breakfast service off the ground next year. The company will hire around 20,000 new employees in the U.S. as part of that effort.
Wendy's has tried serving breakfast in decades past. But competition during that part of the day is usually intense.
This time, the chain's breakfast items — which include the Breakfast Baconator, Frosty-ccino and Honey Butter Chicken Biscuit — will go up against the all-day breakfast of McDonald's and Jack in the Box (JACK), and coffee from Dunkin' Brands (DNKN) and Starbucks (SBUX).
As other fast-food chains try to expand digital ordering, Wendy's digital ordering business is small right now, driving only 2% of U.S. sales, according to Stephens. The chain hopes to bring that number to 10% by 2024. And the company, which partners with Doordash for delivery, wants to work with more third-party deliverers in the future.
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The post Wendy's Stock Near Buy Zone As Earnings Beat, Guidance Raised appeared first on Investor's Business Daily.
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