Wendy's Q2 Performance: Revenue Below Expectations, Increased Costs Impact Operating Profit

The Wendy’s Co WEN reported second-quarter 2024 revenue growth of 1.6% year-over-year to $570.7 million, missing the analyst consensus estimate of $577.371 million.

Adjusted revenues increased 0.9% to $455.7 million. Systemwide sales in the U.S. rose 1.7%, and International increased 8.3%.

Global same-restaurant sales growth was 0.8%. U.S. company-operated restaurant margin was 16.5% versus 17.3% a year ago.

“Our restaurants across the globe continued to deliver same-restaurant sales growth, holding steady with the QSR burger category in the second quarter,” commented President and Chief Executive Officer Kirk Tanner.

Operating profit for the quarter declined 9% year over year to $99.5 million. Adjusted EBITDA was $143.1 million versus $144.5 million year over year.

Operating profit decreased due to increased breakfast advertising costs, higher depreciation, cloud-computing amortization, and lower U.S. restaurant margins.

Adjusted EPS of $0.27 missed the consensus estimate of $0.28.

As of June-end, the company held $700.25 million in cash, cash equivalents, and restricted cash. Operating cash flow for the six months ended June 30 totaled $145.46 million, with a free cash flow of $124.35 million.

In the third quarter of 2024, the company repurchased 0.9 million shares for $15.6 million through July 25. Approximately $260.0 million remains available as of July 25 under the company’s existing share repurchase authorization that expires in February 2027.

Dividend: The company declared its regular quarterly cash dividend to $0.25 per share, payable on September 17 to shareholders of record as of September 3.

2024 Outlook: Wendy’s continues to expect adjusted EPS of $0.98-$1.02 versus the consensus of $0.99 and adjusted EBITDA of $535 million-$545 million.

WEN now sees Global systemwide sales growth of 3% to 5%, cash flows from operations of $365 million to $385 million, and free cash flow of $275 million to $285 million.

Price Action: WEN shares are trading lower by 2.24% at $16.55 at the last check Thursday.

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