On Friday, Evercore ISI adjusted its outlook on Wendy's (NASDAQ:WEN) shares, reducing the price target to $20.00 from the previous target of $22.00. The firm maintained its In Line rating on the stock. The adjustment follows Wendy's second-quarter earnings and subsequent discussions with the company.
The research firm has chosen to keep its 2024 estimated earnings per share (EPS) for Wendy's steady at $0.98, which is consistent with year-over-year figures and closely aligns with the consensus estimate of $0.99.
The decision to maintain the EPS forecast comes despite a more conservative stance on the expected same-store sales (SSS) growth within the United States fast-food industry for the second half of the year.
Consequently, Evercore ISI has revised its SSS growth predictions for the third and fourth quarters to 1% and 2%, respectively, a decrease from the previous forecast of 3% and below the consensus of 3.5%.
The firm noted that there has not been a noticeable acceleration in Wendy's business trends as of July. However, it acknowledged that Wendy's new management is increasingly concentrating efforts on marketing, innovation, and enhancing franchisee profitability. Evercore ISI also highlighted that it anticipates further details on the company's plans for the brand later in 2024.
Wendy's current valuation, as pointed out by Evercore ISI, is around 16 times forward earnings, coupled with a 6% dividend yield. This valuation is noted despite the company's debt leverage, which stands at 4.2 times. Wendy's stock performance and the company's strategic focus will continue to be closely monitored by investors and industry observers alike.
In other recent news, Wendy's Company has reported noteworthy developments in its second-quarter earnings and expansion plans. The company has experienced a 2.6% increase in system-wide sales and a 0.8% growth in same-restaurant sales, largely attributed to breakfast and late-night offerings, as well as a significant 40% year-over-year surge in digital sales.
Despite a slight decrease in adjusted EBITDA, Wendy's is actively pursuing global expansion, with plans to open new restaurants in various international markets, including Ireland, Romania, and New Zealand.
The company's expansion strategy also involves opening 250 to 300 new restaurants by 2024. In addition, Wendy's has declared a third-quarter dividend of $0.25 per share, with a full-year dividend expected to be $1 per share in 2024.
The company continues its share repurchase program, with $260 million remaining of the $500 million authorization. These are recent developments in the company's performance and strategy.
Evercore ISI has adjusted its outlook on Wendy's, reducing the price target to $20.00 from the previous target of $22.00, while maintaining its In Line rating on the stock. The firm's 2024 estimated earnings per share (EPS) for Wendy's remains steady at $0.98.
Despite a more conservative stance on the expected same-store sales (SSS) growth within the US fast-food industry, Evercore ISI anticipates further details on the company's plans for the brand later in 2024.
InvestingPro Insights
Recent data from InvestingPro underscores Wendy's (NASDAQ:WEN) commitment to shareholder returns, as evidenced by its high shareholder yield and a track record of raising its dividend for three consecutive years. The company has maintained dividend payments for over two decades, which aligns with the robust 5.9% dividend yield highlighted by Evercore ISI. Additionally, InvestingPro Tips suggest that Wendy's is trading at a high Price / Book multiple of 12.59 and carries a P/E ratio of 17.34, which may indicate a premium valuation relative to near-term earnings growth.
Despite some analysts revising their earnings downwards for the upcoming period, Wendy's is predicted to remain profitable this year, with a stable revenue growth of 1.72% over the last twelve months as of Q2 2024. This financial stability is further reinforced by the company's liquid assets exceeding its short-term obligations. For investors seeking more detailed analysis, there are over 9 additional InvestingPro Tips available, offering a deeper dive into Wendy's financial health and market performance.
With the next earnings date set for November 6, 2024, and a fair value estimate of $17.45 by InvestingPro, compared to the analyst target of $20.00, investors will be watching closely to see if the strategic focus and efforts of Wendy's new management will translate into improved stock performance and company growth.
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