Wendy's Analysts Break Down Q1 Beat: 'Further Upside Exists'

Wendy’s Co WEN shares traded higher Thursday after the company reported impressive first-quarter earnings and raised its full-year guidance.

For the first quarter, Wendy’s reported adjusted EPS of 20 cents on revenue of $460.2 million. Both numbers exceeded consensus analyst estimates of 15 cents and $444 million, respectively. Revenue was up 13.6% from a year ago.

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Wendy’s management in part credited the success of its breakfast menu and recently launched chicken sandwich for the earnings beat.

Wendy’s reported 13% global same-store sales growth in the quarter. The company said it repurchased $56 million in stock in the first quarter and increased its buyback authorization by $50 million to $150 million.

Looking ahead, Wendy’s raised its full-year 2021 EPS guidance to between 72 cents and 74 cents, up from a previous range of between 67 cents and 69 cents.

Wendy's Growth Trajectory: Stephens analyst James Rutherford said Wendy’s has a clear growth pathway ahead, and the stock remains his Best Idea among restaurant stocks in 2021.

“The company has started the year well ahead of expectations, driven by better U.S. and International comparable store sales and a strong/building development pipeline,” Rutherford wrote.

Cowen analyst Andrew Charles said Wendy’s financial planning capabilities are improving.

“We get the sense the company has gained a stronger grasp on financial planning following 1Q's beat that implies the rest of year EBITDA guidance is virtually intact, despite an extra month of technology fee run rate in 2Q-4Q to fund investments,” Charles wrote.

Breakfast Is Key For Wendy's: Tigress Market Research analyst Ivan Feinseth said “further upside exists” for Wendy’s, and breakfast will continue to be a key growth driver.

“Its successful breakfast menu, along with new delivery services, digital initiatives, and a successful loyalty program, will all continue to drive increasing systemwide sales gains in 2021,” Feinseth wrote.

KeyBanc analyst Eric Gonzalez said Wendy’s had an impressive quarter, but he sees limited near-term catalysts to drive the share price higher.

“As the brand emerges from the pandemic, Wendy’s will need to prove it can hold on to morning
guests as daily routines normalize, in our view,” Gonzalez wrote.

Wendy's Ratings, Price Targets:

• Stephens has an Overweight rating and $26 target.
• KeyBanc has a Sector Weight rating.
• Cowen has a Market Perform rating with a price target lifted from $22 to $24.

Photo courtesy of Wendy's.