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Vivek Kumar
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Wendy’s, a franchisor of quick-service burger restaurants primarily concentrated in the United States, reported better-than-expected earnings and revenue in the first quarter and lifted its full-year earnings forecast.

Columbus, Ohio-based company reported quarterly earnings of $0.20 per share, beating the Wall Street consensus estimates of $0.14 per share. The company now forecasts adjusted earnings in the range of $0.72 to $0.74 per share, up from the previous projection of $0.67 and $0.69 per share.

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Wendy’s said its revenue during the quarter ended April 4, 2021 rose to $460.2 million from $405 million a year ago, beating the market expectations of $444 million.

At the time of writing, Wendy’s shares traded over 2% lower at 22.33 on Wednesday.

Analyst Comments

Wendy’s is participating in the industry’s sales euphoria with a 1Q same-store sales beat of 13.5% vs 10% guidance and Consensus Metrix, that featured strong EBITDA flow-thru. The strong start to the year prompted a raise across 2021 guidance. WEN is favorably repurchasing stock and increasing the repurchase authorization, while nudging the quarterly cash dividend from $0.09/ share to $0.10,” noted Andrew M. Charles, equity analyst at Cowen.

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Wendy’s Stock Price Forecast

Fifteen analysts who offered stock ratings for Wendy’s in the last three months forecast the average price in 12 months of $24.63 with a high forecast of $27.00 and a low forecast of $22.00.

The average price target represents a 10.30% increase from the last price of $22.33. Of those 15 analysts, seven rated “Buy”, eight rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $23 with a high of $30 under a bull scenario and $15 under the worst-case scenario. The firm gave an “Equal-weight” rating on the quick service burger restaurants’ stock.

“Consistent comp performer, with balanced menu offerings and quality positioning. Refranchising complete, driving multiple expansion and FCF. Company mix is now ~5%, which should allow for better FCF conversion and help with future unit growth,” noted John Glass, equity analyst at Morgan Stanley.

“Cost-savings: We see an opportunity for WEN to lower G&A beyond that related to refranchising. WEN also is targeting store cost savings. National breakfast launch: Could be a meaningful sales driver if the target of ~10% of sales is hit and early results are promising (~7% of sales).”

Several other analysts have also updated their stock outlook. Wedbush dropped their price target to $27 from $28 and set an “outperform” rating. The Goldman Sachs Group issued a “neutral” rating and a $23.00 price target for the company. Oppenheimer lowered Wendy’s from an “outperform” rating to a “market perform” rating.

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