If you are an investor hungry for gains, Wendy's (NYSE:WEN) may be able to fill your appetite. In the last month alone, there have been many changes from within the Wendy's Company and among the many changes is the price of their stock. Since January 7 2013, Wendy's investors have been rewarded with a respectable 8% increase. Since November 7, Wendy's stock has risen 17% from $4.26 to $5.13 per share. In addition to these monstrous gains, Wendy's investors have been more than content with receiving quarterly dividend payments yielding over 3%.
When Dave Thomas opened his first Wendy's restaurant in 1969 on 257 East Broad Street in Columbus, Ohio, he opened the door to a new gold standard in quality food. His words, "We don't cut corners on quality" affected everything from Wendy's square-cut hamburgers to their noteworthy customer service. The Wendy's Company is the world's thirds largest quick-service hamburger company. Wendy's is comprised of more than 6,500 franchise and Company-operated restaurants in the United States as well as 26 additional countries and U.S. territories worldwide.
On January 16, (1/16/2013) Wendy's announced preliminary results for the fourth quarter of 2012. The Company will release its audited 2012 results before the market opens on February 28 and will host a conference call at 10 a.m.. Among the many highlights were:
- Consolidated revenues were $2.505 billion, an increase of 3.0 percent compared to $2.431 billion in 2011.
- Wendy's North America Company-operated restaurants generated a same-store sales increase of 1.6 percent during 2012.
- Franchise same-store sales in North America also increased 1.6 percent during the year. Company-operated restaurant margin was 14.0 percent in both 2012 and in 2011.
- Reiterated its preliminary outlook for Adjusted EBITDA of $350 million to $360 million, a 5 to 8 percent increase compared to $333.3 million in 2012.
- The Company's outlook for 2013 Adjusted Earnings per Share of $0.18 to $0.20 is a 13 to 25 percent increase compared to 2012 Adjusted Earnings per Share of $0.16.
Wendy's preliminary results were extremely encouraging and investors should be looking forward to the audited full-year numbers. Wendy's has demonstrated consistency by posting same-store sales increases over the past twelve months. Same-store sales increases are a key indicator for a company's strength. If Wendy's can indeed pull out the higher end of their projected Adjusted EBITDA, they will be staring at a robust 8% increase in a twelve month period.
Having confidence certainly goes a long way in the restaurant business and Wendy's sure seems confident with their projected possible 25% increase in earnings per share in 2013. If Wendy's is able to hit the high-end of their projections, it will help prove that they are in fact getting both stronger and healthier. Wendy's recent growth figures demonstrate why they are becoming a better investment option for someone looking for real long-term value and consistency.
With that being said, how can Wendy's earnings become even stronger? How can Wendy's manage to take a larger bite out of the massive fast-food restaurant market share that McDonald's (NYSE:MCD) seems to single-handedly dominate with annual revenue of 27.5 billion dollars. McDonald's struck it big in the 90's thanks in part to its Ronald McDonald House Charity, their smiley face happy meals, their exciting kid's meals, and their exceptional ability to not only gain customers but turn them into lifetime committed visitors. In fact, getting kids to be loyal to your brand proves to be a monumental factor in terms of establishing future revenue and increases the chances of ultimate success.
Wendy's has made quality attempts at duplicating some of the hospitable things that McDonald's does so well, that helps serve them up such high sales and success. Wendy's 'High School Heisman' honors the achievements of top high school scholars, athletes and citizens in the country, and provides them a platform for continued growth and success. Wendy's further demonstrated their philanthropy efforts by donating nearly 9 million dollars to the 'Dave Thomas Foundation for Adoption' last year alone. Wendy's does an exemplary job proving they are a company that cares about the global community and the members within.
Both natural and fresh are key words in this cut-throat restaurant business and Wendy's has made monumental strides at showing just how natural and fresh their products are. Wendy's has unveiled new products, from their hand-pealed russet potatoes with sea salt, to their new "Dave's Hot and Juicy" fresh-never frozen burgers. Nowadays, the more natural the product, the more people want to consume it. The new and revamped "Right Price" menu along with their new slogan "Big flavor, lots of possibilities" helped Wendy's show their commitment to gain and hold customers and prove their commitment to excellence with quality. Coupled with these revamped menu offerings has been an "Image Activation" initiative which entails the revamping of all store locations with a new logo and updates to improve specific restaurants.
These expenditures undoubtedly cost capital but are necessary to build long term revenue and profits. In 2012, 66 Wendy's restaurants underwent the reimaging process and are since averaging sales increases in excess of 25%. Imagine the possibilities if there is similar future success with operation "Image Activation". If these 25% sales increases translate to just half of the stores that are expected to undergo this initiative, this can prove to be a pivotal factor in Wendy's future and chances at accelerating their growth.
There is no denying that Wendy's brand is strong. The Wendy's Company is the number three ranked burger-chain marginally behind competitor Burger King Worldwide (BKW). A true measure of how healthy Wendy's really is can be found in their commitment to pay their investors dividends. Not only has Wendy's consistently paid their investors dividends since 2004, but they have recently upped their dividend by an astonishing 100%. Wendy's dividend yield of 3.1% compares equally to McDonald's yield of 3.2% and is far above Burger King's yield of 0.9%.
Wendy's steady and rather substantial dividend should be enough reason alone to want to pour some cash in this hot stock. In November 2012, Wendy's Board of Directors authorized a 100% increase in the quarterly cash dividend rate and also introduced a share repurchase program that allows the company to repurchase up to $100 million of common stock through December 2013. These are moves of a sturdy and secure company.
Can all of these recent positives translate to a healthy market share increase? We know that Wendy's offers a solid dividend and is certainly both a strong and reputable brand. The possible beefy rewards attached to Wendy's stock seem to outweigh the slim risks. Can Wendy's strength, brand reputation, and re-imaging initiatives help them establish more life-long customers and ultimately make a transition into increased long-term profitability? If Wendy's manages to gain just 1% of the total global market share for fast food, that would represent over 7 billion dollars in revenue. Will Wendy's new slogan, "Big flavor, lots of possibilities" hold true with its stock?
Disclosure: I am long WEN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.