Wendy’s Tops Q1 Earnings and Revenue Estimates; Target Price $30 in Best Case

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.

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.

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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