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On Wednesday, JPMorgan analyst Rahul Krotthapalli updated his stance on Wendy’s (NASDAQ:WEN) shares, initiating coverage with a Neutral rating and adjusting the price target to $17, a decrease from the previous $20. The revision comes as the fast-food chain, currently trading at $15.91, approaches its investor update scheduled for March 6 at the company’s Dublin, Ohio headquarters. According to InvestingPro data, 20 analysts have recently revised their earnings expectations downward for the upcoming period, with analyst targets ranging from $14 to $29.
Krotthapalli’s comments indicate a focus on the internal changes at Wendy’s, particularly under the leadership of CEO Kirk Tanner, who celebrated his first anniversary in the role in February. Tanner’s prior experience at PepsiCo (NASDAQ:PEP) is noted, as well as the recent appointment of CFO Ken Cook in December, who brings his background from UPS to the table. Despite leadership transitions, InvestingPro data shows the company maintains strong shareholder returns with a significant 6.29% dividend yield and a 23-year track record of consistent dividend payments.
The analyst points out that for Wendy’s, a brand experiencing slow growth, it is crucial to enhance cash returns for new U.S. restaurant units. Despite a slight increase in the number of U.S. units to 5,933 at the end of 2024, representing a 1.4% rise since 2019, this figure also reflects a 2.9% decline since 2014.
Investors and analysts alike are anticipating the upcoming investor update, where further insights into the company’s strategies and performance under the new leadership are expected to be shared. Krotthapalli’s comments suggest that these strategies will be critical for Wendy’s to accelerate growth and improve financial returns in the competitive fast-food industry.
In other recent news, Wendy’s reported its fourth-quarter 2024 financial results, surpassing earnings expectations with an adjusted earnings per share (EPS) of $0.25, compared to the forecasted $0.24. The company’s revenue also exceeded estimates, reaching $574.3 million, reflecting strong operational performance. Analysts from UBS and Citi have both revised their price targets for Wendy’s, with UBS lowering it to $15.00 and Citi to $15.50, while maintaining a Neutral rating on the stock. Despite these adjustments, Wendy’s has set a 2025 global system-wide sales growth target of 2-3% and a net unit growth target of 2-3%.
Citi analysts noted potential short-term positive drivers for Wendy’s, such as the introduction of the Thin Mint Frosty and an acceleration in share repurchases. Wendy’s has also shared plans to bolster growth throughout the current year, with a focus on strengthening same-store sales and driving category share gains. The company’s approach to its 2025 guidance has been labeled as realistic and achievable by UBS, despite challenges in the quick-service restaurant industry.
Wendy’s demonstrated robust performance in the fourth quarter of 2024, with global system-wide sales increasing by 5.4% to $3.7 billion. The company plans to present updated strategic plans and longer-term guidance during the investor day scheduled for March 6, 2025. Despite pressures, the company remains committed to product innovation and operational improvements to drive growth.
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