Despite rising inflation, shares of
The Wendy's Company ( WEN Quick Quote WEN - Free Report) have done well in the past three months. During the said period, the company’s shares have gained 13.1%, compared with the industry’s increase of 7.1%. The company is benefiting from its focus on the breakfast business, comps growth and international expansion. This Zacks Rank #3 (Hold) company has an impressive long-term earnings growth rate of 12.8%. In fiscal 2022 and 2023, the company’s earnings are likely to witness growth of 9.6% and 5.2%, year over year, respectively. Let’s delve deeper. Growth Drivers
Wendy’s continues to focus on breakfast daypart offerings to drive incremental sales. During the second quarter of fiscal 2022, the company launched its breakfast offerings in Canada and reported solid performance of the same. Also, it reported strong breakfast performance in the United States.
The company has been benefiting from its marketing efforts (buck biscuit promotion and awareness messaging), high-quality offerings, repeat ordering and high customer satisfaction levels. The company expects the breakfast business in the United States to accelerate in 2022 by roughly 10%. By 2022-end, it anticipates average weekly U.S. breakfast sales to be roughly $3,000 per restaurant. Image Source: Zacks Investment Research
The company is also benefiting from robust comps growth. In second-quarter fiscal 2022, global comps increased 3.7% year over year. The improvement was driven by continued strength across its U.S. and international businesses.
During the quarter under discussion, comps in the United States witnessed growth of 2.3% year over year. The upside was driven by growth in breakfast and digital businesses. Same-restaurant sales at international restaurants (excluding Venezuela and Argentina) rose 15.2% year over year. For 2022, the company now anticipates global system-wide sales growth to be 6-8%. Wendy’s is steadfast in expanding its presence globally. The company’s international business is thus poised to be a driver of future growth. The less-saturated emerging markets offer the company enormous growth opportunities. Given the solid development foundation, the company anticipates opening 8,000-8,500 global restaurants by 2025-end. The company emphasized on a new global restaurant design to boost its operating efficiency. The design integrates digital access and focuses on optimized layouts to enhance convenience, speed and accuracy. Moreover, the initiative lowers build costs by almost 10%, thereby paving a path for improved returns. Key Picks
Some better-ranked stocks in the Zacks Retail – Restaurants industry are
Wingstop Inc. ( WING Quick Quote WING - Free Report) , Chuy's Holdings, Inc. ( CHUY Quick Quote CHUY - Free Report) and Chipotle Mexican Grill, Inc. ( CMG Quick Quote CMG - Free Report) . Wingstop sports a Zacks Rank #1 (Strong Buy) at present. WING has a long-term earnings growth rate of 11%. Shares of WING have declined 6.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here. The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels. Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have decreased 1.7% in the past year. The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels. Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 11.8% in the past year. The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.