Wendy’s Earnings: Here’s Why Investors are Happy Now

Wendy’s (NYSE:WEN) delivered a profit and beat Wall Street’s expectations, BUT came up short on beating the revenue expectation. The revenue miss is a negative sign to shareholders seeking high growth out of the company. Shares are up 10.18%.

Wendy’s Earnings Cheat Sheet

Results: Adjusted Earnings Per Share increased 60% to $0.08 in the quarter versus EPS of $0.05 in the year-earlier quarter.

Revenue: Rose 0.72% to $650.5 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Wendy’s reported adjusted EPS income of $0.08 per share. By that measure, the company beat the mean analyst estimate of $0.06. It missed the average revenue estimate of $655.94 million.

Quoting Management: “The system optimization initiative will create a growth opportunity for both the Company and strong franchise operators by expanding participation in our Image Activation program to a larger base of franchisees,” Wendy’s® President and Chief Executive Officer Emil Brolick said. “We expect to generate a higher operating margin and stronger free cash flow, along with further enhancing the quality of our earnings with a more predictable revenue stream from a higher percentage of royalty and rent income. We believe system optimization will also enable us to increase our long-term earnings per share growth rate and return incremental cash to shareholders in the form of dividends and share repurchases, beginning with a 25-percent increase in our third-quarter dividend.”

Key Stats (on next page)…

Revenue increased 7.76% from $603.68 million in the previous quarter. EPS increased 166.67% from $0.03 in the previous quarter.

Looking Forward: Analysts have a neutral outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings is a profit of $0.05 and has not changed. For the current year, the average estimate has moved up from a profit of $0.19 to a profit of $0.21 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Email any earnings discrepancies to earnings [at] wallstcheatsheet.com)