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Wendy's (WEN) Down 20% in the Past 6 Months: Will It Revive?

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Shares of The Wendy's Company (WEN - Free Report) have fallen 20.1% in the past six months, compared with the industry’s decline of 21%. The rise in labor rate and commodity costs is hurting the company. However, focus on menu innovation, technological upgrades and international expansion bode well.

Factors Likely to Aid the Stock Recover

Wendy’s is committed to expanding its presence globally. The company’s international business is poised to be a growth driver in the days ahead. Despite the pandemic, the company opened approximately 150 restaurants in 2020. In 2021, it inaugurated more than 200 restaurants globally despite a very challenging supply-chain environment. In first-quarter 2022, the company opened new restaurants. This marks one of the best quarters for the company in terms of unit growth.

The Zacks Rank #3 (Hold) company has a robust pipeline and is on track to achieve its target of 5-6% net unit growth in 2022. Given the solid development foundation, the company anticipates opening 8,500-9,000 global restaurants by the 2025-end.

Wendy’s continues to focus on Breakfast daypart Offerings to drive incremental sales. In first-quarter 2022, breakfast accounted for nearly 7% of sales. The company has been benefiting from its marketing efforts, high-quality offerings, repeat ordering and high customer satisfaction levels. In 2021, the company’s breakfast business surged 25%. It expects the breakfast business in the United States to accelerate in 2022 by roughly 10% to 20%. By the end of 2022, it anticipates average weekly U.S. breakfast sales to be roughly $3,000 to $3,500 per restaurant.

The company has been focusing on digitalization to drive growth. During first-quarter 2022, Wendy’s had nearly 10% of its sales coming through digital channels in the United States and 17% in Canada. This was driven by gains in delivery and mobile ordering sales and several successful promotions. Since the company launched Wendy's Rewards program app, downloads have increased. The company has been witnessing higher average checks.

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Key Picks

Some better-ranked stocks in the same space are BBQ Holdings, Inc. (BBQ - Free Report) , Jack in the Box Inc. (JACK - Free Report) and Arcos Dorados Holdings Inc. (ARCO - Free Report) .

BBQ Holdings carries a Zacks Rank #2 (Buy). BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have increased 12.3% in the past year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for BBQ Holdings' 2022 sales and EPS suggests growth of 40.9% and 66.2%, respectively, from the year-ago period's levels.

Jack in the Box carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 11.8%, on average. Shares of the company have declined 33% in the past year.

The Zacks Consensus Estimate for JACK’s current-year sales growth of 5% from the year-ago period's levels.

Arcos Dorados flaunts a Zacks Rank #1. Arcos Dorados has a long-term earnings growth of 31.3%. Shares of the company have appreciated 12.3% in the past year.

The Zacks Consensus Estimate for Arcos Dorados' 2022 sales and EPS suggests growth of 16.6% and 66.7%, respectively, from the year-ago period's levels.

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