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Wendy's (WEN) Down 0.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Wendy's (WEN - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Wendy's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Wendy's Q4 Earnings & Revenues Top Estimates, Fall Y/Y
Wendy's reported fourth-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The bottom line beat the consensus mark for the fourth straight quarter. The metrics declined on a year-over-year basis.
Q4 Earnings & Revenues
During the fiscal fourth quarter, the company reported adjusted earnings of 16 cents per share that beat the Zacks Consensus Estimate of 15 cents. However, the bottom line fell 5.9% year over year from an adjusted earnings per share (EPS) of 17 cents reported in the prior-year quarter.
Quarterly revenues of $473.2 million beat the consensus mark of $462 million. However, the top line declined 0.2% on a year-over-year basis. The downside was primarily due to the lapping of the 53rd operating week in 2020, which resulted in an approximately $28 million impact. Excluding the impact of the 53rd operating week, the top line rose year over year on the back of a rise in franchisee royalty revenues, advertising funds and higher franchise fees.
During the quarter under review, same-restaurant sales at International restaurants (excluding Venezuela and Argentina) rose 18.1% year over year against a decline of 2.3% in the year-ago quarter. Comps at Global restaurants rose 7.3% year over year compared with a 4.7% increase reported in the prior-year quarter. Comps in the United States witnessed growth of 6.1% year over year compared with an increase of 5.5% in the prior-year quarter.
In the quarter under review, Wendy’s inaugurated 81 restaurants globally, reflecting an increase of 58 net new units.
System-Wide Sales Discussion
During the fiscal fourth quarter, global system-wide sales — including company-operated and franchise restaurants — were nearly $3.1 million, almost flat year over year. During the quarter under review, system-wide sales in the U.S. and the International segments came in at approximately $2.8 million and $0.4 million, respectively, showing not much movement from the prior-year quarter’s levels.
Operating Highlights
During the fiscal fourth quarter, the company-operated restaurant margin came in at 14.5% compared with 17.6% in the year-ago quarter. The downside was primarily due to higher labor rate, increase in commodity and insurance costs. However, this was partially offset by a rise in customer count and higher average check.
General and administrative expenses in the quarter were $64.3 million compared with $59.3 million in the prior-year quarter. This was primarily on account of higher incentive compensation and stock compensation accrual.
Quarterly operating profit amounted to $76.9 million, down 2.1% from the year-ago quarter. The decline was primarily due to a rise in general and administrative expenses, a decline in company-operated restaurant margin, and higher franchise support and other costs.
Net income during the fiscal fourth quarter was $52.1 million, up 34.6% from $38.7 million reported in the year-ago quarter. The uptick came on the back of lower tax rates and interest expenses.
Adjusted EBITDA during the quarter totaled $102.7 million, down 10.3% from $114.5 million reported in the prior-year quarter. The downside was primarily due to a fall in company-operated restaurant margin and net rental income coupled with a rise in general and administrative expenses, higher franchise support and other costs. However, this was partially offset by higher franchise royalty revenue and fees.
Balance Sheet
Cash and cash equivalents as of Jan 2, 2022, totaled $249.4 million compared with $307 million on Jan 3, 2021. Inventories at the end of the fiscal fourth quarter amounted to $5.9 million compared with $4.7 million in the prior-year quarter. As of Jan 2, 2022, long-term debt was $2,356.4 million compared with $2,218.2 million in the year-ago period.
The company announced a hike in its quarterly dividend payout. Wendy’s raised its quarterly dividend by 4.2%, which indicates its intention to utilize free cash for boosting shareholders’ returns. The company raised the quarterly dividend to 12.5 cents per share (or 50 cents annually) from the previous payout of 12 cents (or 48 cents annually). The hiked dividend will be paid out on Mar 15, 2022, to shareholders on record as of Mar 7, 2022.
In 2021, the company repurchased 1.5 million shares worth $267.7 million. During the fiscal first quarter of 2022, the company repurchased 0.7 million shares, thereby resulting in the completion of its earlier announced $300 million share repurchase authorization. Management approved a new share repurchase program worth $100 million to boost stockholders’ value. The company stated the maturity of the program in February 2023.
2021 Highlights
Total revenues in 2021 amounted to $1,897 million compared with $1,733.8 million in 2020.
Adjusted EBITDA in 2021 came in at $467 million compared with $420.1 million in 2020.
In 2021, diluted EPS came in at 82 cents per share compared with 57 cents reported in the previous year.
2022 Outlook
For 2022, the company now expects global system-wide sales growth to be 6-8%. Adjusted EBITDA is projected in the band of $490 million to $505 million. Adjusted EPS for 2022 are anticipated in the range of 87-91 cents. The company expects cash flow from operations in the band of $320-$340 million, while capital expenditures are projected between $90 million and $100 million. Free cash flow is anticipated to be $230-$240 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Wendy's has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wendy's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Wendy's (WEN) Down 0.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Wendy's (WEN - Free Report) . Shares have lost about 0.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Wendy's due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Wendy's Q4 Earnings & Revenues Top Estimates, Fall Y/Y
Wendy's reported fourth-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The bottom line beat the consensus mark for the fourth straight quarter. The metrics declined on a year-over-year basis.
Q4 Earnings & Revenues
During the fiscal fourth quarter, the company reported adjusted earnings of 16 cents per share that beat the Zacks Consensus Estimate of 15 cents. However, the bottom line fell 5.9% year over year from an adjusted earnings per share (EPS) of 17 cents reported in the prior-year quarter.
Quarterly revenues of $473.2 million beat the consensus mark of $462 million. However, the top line declined 0.2% on a year-over-year basis. The downside was primarily due to the lapping of the 53rd operating week in 2020, which resulted in an approximately $28 million impact. Excluding the impact of the 53rd operating week, the top line rose year over year on the back of a rise in franchisee royalty revenues, advertising funds and higher franchise fees.
During the quarter under review, same-restaurant sales at International restaurants (excluding Venezuela and Argentina) rose 18.1% year over year against a decline of 2.3% in the year-ago quarter. Comps at Global restaurants rose 7.3% year over year compared with a 4.7% increase reported in the prior-year quarter. Comps in the United States witnessed growth of 6.1% year over year compared with an increase of 5.5% in the prior-year quarter.
In the quarter under review, Wendy’s inaugurated 81 restaurants globally, reflecting an increase of 58 net new units.
System-Wide Sales Discussion
During the fiscal fourth quarter, global system-wide sales — including company-operated and franchise restaurants — were nearly $3.1 million, almost flat year over year. During the quarter under review, system-wide sales in the U.S. and the International segments came in at approximately $2.8 million and $0.4 million, respectively, showing not much movement from the prior-year quarter’s levels.
Operating Highlights
During the fiscal fourth quarter, the company-operated restaurant margin came in at 14.5% compared with 17.6% in the year-ago quarter. The downside was primarily due to higher labor rate, increase in commodity and insurance costs. However, this was partially offset by a rise in customer count and higher average check.
General and administrative expenses in the quarter were $64.3 million compared with $59.3 million in the prior-year quarter. This was primarily on account of higher incentive compensation and stock compensation accrual.
Quarterly operating profit amounted to $76.9 million, down 2.1% from the year-ago quarter. The decline was primarily due to a rise in general and administrative expenses, a decline in company-operated restaurant margin, and higher franchise support and other costs.
Net income during the fiscal fourth quarter was $52.1 million, up 34.6% from $38.7 million reported in the year-ago quarter. The uptick came on the back of lower tax rates and interest expenses.
Adjusted EBITDA during the quarter totaled $102.7 million, down 10.3% from $114.5 million reported in the prior-year quarter. The downside was primarily due to a fall in company-operated restaurant margin and net rental income coupled with a rise in general and administrative expenses, higher franchise support and other costs. However, this was partially offset by higher franchise royalty revenue and fees.
Balance Sheet
Cash and cash equivalents as of Jan 2, 2022, totaled $249.4 million compared with $307 million on Jan 3, 2021. Inventories at the end of the fiscal fourth quarter amounted to $5.9 million compared with $4.7 million in the prior-year quarter. As of Jan 2, 2022, long-term debt was $2,356.4 million compared with $2,218.2 million in the year-ago period.
The company announced a hike in its quarterly dividend payout. Wendy’s raised its quarterly dividend by 4.2%, which indicates its intention to utilize free cash for boosting shareholders’ returns. The company raised the quarterly dividend to 12.5 cents per share (or 50 cents annually) from the previous payout of 12 cents (or 48 cents annually). The hiked dividend will be paid out on Mar 15, 2022, to shareholders on record as of Mar 7, 2022.
In 2021, the company repurchased 1.5 million shares worth $267.7 million. During the fiscal first quarter of 2022, the company repurchased 0.7 million shares, thereby resulting in the completion of its earlier announced $300 million share repurchase authorization. Management approved a new share repurchase program worth $100 million to boost stockholders’ value. The company stated the maturity of the program in February 2023.
2021 Highlights
Total revenues in 2021 amounted to $1,897 million compared with $1,733.8 million in 2020.
Adjusted EBITDA in 2021 came in at $467 million compared with $420.1 million in 2020.
In 2021, diluted EPS came in at 82 cents per share compared with 57 cents reported in the previous year.
2022 Outlook
For 2022, the company now expects global system-wide sales growth to be 6-8%. Adjusted EBITDA is projected in the band of $490 million to $505 million. Adjusted EPS for 2022 are anticipated in the range of 87-91 cents. The company expects cash flow from operations in the band of $320-$340 million, while capital expenditures are projected between $90 million and $100 million. Free cash flow is anticipated to be $230-$240 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
At this time, Wendy's has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wendy's has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.