Wendy's Stable Same-Store Sales Prompts 8% Price Target Hike By This Analyst

Stephens analyst Joshua Long reiterated an Overweight rating on the shares of The Wendy's Company WEN and raised the price target from $25.00 to $27.00.
The analyst's October channel checks suggested relatively steady momentum sequentially driven in part by strong media awareness and a focus on value through the Biggie Bag platform.
In November, Wendy's balance of price/value affordability remained a driver of underlying trends despite what the analyst believed was a relatively slow start to the month until the introduction of the new Italian Chicken Sandwich.
The analyst said the new product performed well into the December timeframe following its introduction.
For Q4, the analyst increased the domestic same-store sales estimate to +4% versus the consensus of +4.2%.
The analyst said that Wendy's realized commodity and labor inflation of nearly 15% and over 6%, respectively, during the recently reported Q3 period.
Although these figures remain elevated versus historical periods, they are a relative improvement versus Q2, which experienced 19% commodity inflation and 11%-12% labor inflation, the analyst cited.
Through November, the analyst is encouraged to see food costs stabilize (and in some cases move lower) across key input costs, including ground beef (representing ~20% of the Wendy's food cost basket) and chicken (representing ~20% of the cost basket).
On the labor side, the environment remains challenging, however the analyst's checks suggest a relative improvement in staffing levels for the industry.
Looking into December, the analyst added that Wendy's marketing calendar appears well-positioned to build upon underlying momentum through a balance of value offerings, items with price point affordability, and innovative extensions of popular menu platforms.
Price Action: WEN shares are trading lower by 1.92% at $22.20 on the last check Tuesday.
Photo Via Wikimedia Commons

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