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Tale of the Tape

Zacks Equity Research

Should You Sell Wendy's (WEN) Before Earnings?
November 08, 2016

WEN

Trades from $3

Investors are always looking for stocks that are poised to beat at earnings season and The Wendy's Company (WEN - Free Report) may be one such company. The firm has earnings coming up pretty soon, and events are shaping up quite nicely for their report.

That is because Wendy's is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings—with the most up-to-date information possible—is a pretty good indicator of some favorable trends underneath the surface for WEN in this report.

In fact, the Most Accurate Estimate for the current quarter is currently at 11 cents per share for WEN, compared to a broader Zacks Consensus Estimate of 10 cents per share. This suggests that analysts have very recently bumped up their estimates for WEN, giving the stock a Zacks Earnings ESP of 10% heading into earnings season.

WENDYS CO/THE Price and EPS Surprise

 

WENDYS CO/THE Price and EPS Surprise | WENDYS CO/THE Quote

Why is this Important?

A positive reading for the Zacks Earnings ESP has proven to be very powerful in producing both positive surprises, and outperforming the market. Our recent 10 year backtest shows that stocks that have a positive Earnings ESP and a Zacks Rank #3 (Hold) or better show a positive surprise nearly 70% of the time, and have returned over 28% on average in annual returns (see more Top Earnings ESP stocks here).

Given that WEN has a Zacks Rank #2 (Buy) and an ESP in positive territory, investors might want to consider this stock ahead of earnings. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Clearly, recent earnings estimate revisions suggest that good things are ahead for Wendy's, and that a beat might be in the cards for the upcoming report.

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