Fast Food Chain Wendy's Misses On Topline: Holds On To Long-Term Outlook Amid Expanding Pipeline

Wendy's Company WEN reported third-quarter FY23 sales growth of 3.4% year-on-year to $550.60 million, missing the analyst consensus estimate of $555.19 million.

Adjusted revenues increased 2.9% to $441.6 million. Systemwide sales in the U.S. rose 3.6%, and International increased 13.6%.

Global same-restaurant sales growth was 2.8%. U.S. company-operated restaurant margin was 15.6% versus 14.8% a year ago.

Operating margin was 18.5%, and operating income for the quarter rose 3.6% Y/Y to $101.6 million.

Adjusted EBITDA increased 3.5% Y/Y to $139.2 million. Adjusted EPS of $0.27 beat the consensus estimate of $0.25.

The company held $672.88 million in cash and equivalents as of October 1, 2023. Operating cash flow year-to-date totaled $269.5 million, with a free cash flow of $226.4 million.

As of October 26, approximately $332.1 million remains available under the company's existing share repurchase authorization that expires in February 2027. The company declared its regular quarterly cash dividend to $0.25 per share, payable on December 15, 2023, to shareholders of record as of December 1, 2023.

"Global same-restaurant sales accelerated on a 2-year basis and digital sales grew 30% versus the prior year, driving another quarter of Company-operated restaurant margin expansion. Additionally, we have now opened 152 new restaurants across the globe this year and further solidified our development pipeline through significant new agreements in key growth markets," said CEO Todd Penegor.

Outlook: Wendy's continues to expect FY23 adjusted EPS of $0.95 - $1.00 versus the consensus of $0.98.

WEN revised FY23 global systemwide sales growth from 6%- 8% to 6%-7%. The company still expects FY23 adjusted EBITDA of $530 million - $540 million.

WEN maintains its long-term outlook for 2024-2025, with systemwide sales growth in mid-single digits and free cash flow growth of high-single to low-double digits.

Price Action: WEN shares are trading lower by 1.76% at $18.66 on the last check Thursday.