The Wendy's Company - Reports Q3 EPS Wednesday AM - Stock Near High - Going Higher?

Nov. 07, 2016 6:54 PM ETThe Wendy's Company (WEN)
Roger Lipton profile picture
Roger Lipton


  • Third largest hamburger fighting a market share battle.
  • Moving to pure franchising model but leasing income (from franchisees) is substantial, not so "asset-light".
  • Nelson Peltz's Trian owns 19.5%, very sophisticated financial strategist.

Upcoming Earnings Release & Conclusion

The Wendy's Company (NASDAQ:WEN) is scheduled to report its 16Q3 results Wednesday, November 9 at 7:30 AM EST with a conference call at 9 AM EST. Per Bloomberg, the consensus estimates of the 21 sell-side analysts covering the company are for comps at 1.2% (range 0.5% to 1.9%), revenues at $349.4M (range $313-367M) and EPS at $0.10 (range $0.08-0.12). The EPS and comp estimates were reduced very modestly following the Q2 report, but have remained stable since. However, the revenue estimates have very modestly inched up. Estimates for 16Q4 and FY17 have followed the same pattern. Also per Bloomberg, the mean target price is $11.75 (range $10-14.50), which is little changed since the Q2 report.

Though 11.5x trailing EBITDA (per our table below) is reasonable for a well-established (soon to be) pure franchisor, the number of Wendy's operating units are down over the last several years, and franchisees are remodeling rather than building new locations in the current challenging environment. The company is already leveraged so major additional debt to repurchase stock or support franchisees in one way or another, even at today's low rates, is unlikely. With earnings per share progress in the range of 10% annually, we think WEN is more than adequately valued right now. We don't expect any substantial upside surprise, unless it is a result of financial engineering rather than fundamentals at the store level. We obviously would not be trading WEN from the long side going into this earnings report.

WEN: Company Overview (1) Excerpted from WEN corporate documents and presentations, and assembled by Lipton Financial Services, Inc. (LFSI). As indicated by quotation marks, information was previously published on its website after Q2 earnings report. Quotation marks and (1) designate such previously published material. The conclusion stated above has not been previously published and is based on all past

This article was written by

Roger Lipton profile picture
Roger Lipton publishes regularly at - with four decades of restaurant, franchising, and retail experience, he covers every publicly held restaurant company (over 50 of them)  plus selected non-restaurant franchisors. He has been an analyst, investment banker, investor and advisor. The family office he manages concentrates similarly, with a secondary concentration in precious metals and international monetary developments. His website is an acknowledged "one stop shop" for investors and operators within the foodservice and franchising industries.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

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