Wendy's Mulling Sale; Posts Sharp EPS Drop; Beats Street

Shares of number-three U.S. burger chain Wendy's International jumped 14% to $37.05 in AH trading yesterday after the company announced it has formed a special committee to explore strategic options, including a possible sale. The company also posted a steep drop in quarterly earnings to $14.9 million ($0.15/share) versus $51.2 million ($0.45) a year ago. Analysts were expecting EPS of $0.13. Income from continuing operations came in at $14.5 million ($0.15/share) against a loss of $5.9 million (-$0.05) a year earlier. Sales were up 2% to $590.2 million. Q1 U.S. same-store sales were up 3.8%, largely on new products like cold deli sandwiches, a 99-cent chicken sandwich and a vanilla Frosty. The company is under pressure from activist shareholders, including Nelson Peltz, to take action to boost the stock price. Peltz's Trian funds held approximately 9.7 million shares as of December, making it the company's largest investor. Wendy's, which is currently valued at $2.8 billion, spun off coffee-and-doughnut chain Tim Hortons in September and the Baja Fresh chain in November.

Sources: Press release, Bloomberg, Reuters
Commentary: 4 Themes To Note In This Week's Restaurant Earnings • The Bar Mitzvah Portfolio: Five Long Term Winners
Stocks/ETFs to watch: Wendy's International (WEN). Competitors: Burger King Corp. (BKC), McDonald's Corp. (MCD), Yum! Brands Inc. (YUM). ETFs: Consumer Discretionary SPDR (XLY), PowerShares Dynamic Food & Beverage (PBJ)

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