The Wendy's Company (WEN Quick QuoteWEN - Free Report) stock has lost 18.9% in the past month compared with the industry and the S&P 500’s decline of 2.8% and 3.8%, respectively.

The recent decline can be primarily attributed to macroeconomic challenges, stiff competition and high operating costs. A softer macroeconomic environment, including cautious consumer spending and inflationary pressure, continues to hurt discretionary dining.

The company is still seeing inflationary pressure on beef. While WEN intends to strategically adjust select menu prices and product offerings to mitigate the challenges, potential delays in implementation and competitive pressures may hinder its ability to offset cost increases fully. For fiscal 2025, the company projects commodity inflation of about 1% and wage inflation of approximately 4%. Our model predicts total costs and expenses in 2025 to rise 1% year over year to $1.9 billion.

WEN Trades 39% Below its 52-Week High

The stock closed at $12.54 yesterday, 39% below its 52-week high of $20.65 but slightly above 52-week low of $12.05. In the past month, WEN underperformed industry players like The Cheesecake Factory Incorporated (CAKE Quick QuoteCAKE - Free Report) , Shake Shack Inc. (SHAK Quick QuoteSHAK - Free Report) and Arcos Dorados Holdings Inc. (ARCO Quick QuoteARCO - Free Report) .

WEN Price Performance

Image Source: Zacks Investment Research

WEN’s Fundamentals Look Solid

The company continues to impress investors with robust global same-restaurant sales growth. During the fourth quarter of fiscal 2024, same-restaurant sales at international restaurants (excluding Argentina) rose 4.9% year over year compared with 4.3% a year ago. Comps at global restaurants increased 4.3% year over year compared with 1.3% in the prior-year quarter. The metric in the United States registered 4.1% year-over-year growth compared with 0.9% in the year-ago quarter.

Furthermore, emphasis on introducing innovative offerings and providing compelling value propositions to enhance customer satisfaction and sustain restaurant margins is expected to drive performance throughout 2025.

Wendy’s continues to focus on Breakfast daypart Offerings to drive incremental sales. It believes there is significant growth potential in the breakfast business without the need for additional labor, thus improving the restaurants' economic model. In 2024, Wendy’s breakfast sales grew more than 6% year over year, outperforming the QSR burger category, driven by increased brand awareness and product innovation. The company expanded its menu beyond breakfast with new offerings like Saucy Nuggs and seasonal Frosty flavors, enhancing customer engagement throughout the year.

Breakfast remains a key growth driver and will continue to receive a larger share of advertising spending relative to its sales contribution. Looking ahead to 2025, Wendy’s plans to sustain breakfast momentum through product innovation, strategic partnerships and targeted promotions to attract new customers. Additionally, the company is reallocating breakfast advertising funds toward field operations to enhance the customer experience across all dayparts and improve restaurant efficiency.

Coming to net unit growth, the company expanded its system footprint by opening 276 restaurants globally in fiscal 2024. The company closed underperforming units to strengthen its footprint. Although closures present a near-term sales headwind, new locations in stronger trade areas are expected to deliver double the AUVs of the closed restaurants. The company remains confident in achieving net unit growth of 2% to 3% in 2025, supported by ongoing new builds and franchisee commitments to expand the restaurant network.

For 2025, WEN anticipates opening between 150 units and 200 units, with approximately two-thirds of these located in international markets. Within that segment, around one-third is expected to come from Canada and Europe, while about half will be in APMEA.

WEN Trades at a Discount

WEN is currently valued at a discount compared with the industry on a forward 12-month P/E basis. Its forward 12-month price-to-earnings ratio is 12.16, significantly down from the industry. The stock is also trading at a discount compared with other industry players like Cheesecake and Shake Shack. But it is trading at a premium compared with Arcos Dorados.

WEN’s P/E Ratio (Forward 12 Months)

Image Source: Zacks Investment Research

Earnings Estimate Revisions for WEN

The Zacks Consensus Estimate for WEN’s 2025 sales and EPS implies a year-over-year decline of 0.1% and 1%, respectively. Earnings estimate revisions for 2025 have witnessed downward revisions of 1% in the past seven days. Conversely, industry players like Cheesecake, Shake Shack and Arcos Dorados earnings in 2025 are likely to witness year-over-year growth of 7.3%, 38% and 2.8%, respectively.

End Note

Wendy’s stock recently faced significant pressure due to macroeconomic headwinds, inflationary challenges and competitive pressures. While the company continues to deliver solid same-restaurant sales growth globally and is leveraging innovation and breakfast expansion to drive traffic, the near-term environment remains uncertain. Ongoing inflation in key inputs like beef, cautious consumer spending and recent earnings estimate revisions suggest potential volatility ahead.

Although the stock trades at a discount and long-term fundamentals appear sound, it is wise for existing investors to hold and wait for execution on strategic initiatives. However, fresh buyers may want to stay on the sidelines until there is clearer visibility on margin recovery and sustained earnings momentum. WEN carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.