On Monday, Loop Capital affirmed its Buy rating on Wendy's (NASDAQ:WEN) shares, holding steady with a $26.00 price target. The firm's latest franchisee checks within the United States revealed that Wendy's same-store sales growth experienced a slight slowdown towards the end of the third quarter (3Q) but ultimately aligned with the overall expectations for the quarter.
According to the firm's analysis, Wendy's same-store sales increased by approximately 1.5-2.0% in the last five weeks of the third quarter, a slight decrease from the 2.0-2.5% growth rate observed during the initial eight weeks. Despite this modest deceleration, the implied same-store sales growth for the full third quarter was around 2.0%, which was slightly below Loop Capital's earlier projection of 2.5% but was essentially consistent with the consensus estimate of a 1.9% increase.
On a two-year stacked basis, the 2.0% growth translates to a 4.3% gain, which is a decrease from the 5.7% two-year stack reported by Wendy's in the second quarter of 2024. Nevertheless, the implied three-year stacked growth of 10.6% for the third quarter signifies a notable acceleration from the 7.9% growth reported in the second quarter.
Loop Capital's continued endorsement of a Buy rating and a price target of $26 for Wendy's stock is based on a valuation of 13.5 times the firm's 2025 estimated enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This valuation reflects the firm's confidence in the fast-food chain's financial prospects moving forward.
In other recent news, Wendy's Company has been making strategic changes to its leadership and expanding its global footprint. Wendy's has appointed John Min as Chief Legal Officer and Secretary, and Mary Greenlee as Senior Vice President of U.S. Operations. These appointments leverage their extensive experience in legal strategy and franchise systems, respectively.
In terms of financial performance, Wendy's second-quarter earnings report showed a 2.6% increase in system-wide sales and a 0.8% growth in same-restaurant sales, largely due to successful breakfast and late-night offerings. The company also reported a substantial 40% year-over-year surge in digital sales.
Analysts' ratings on Wendy's have been varied. TD Cowen has maintained its Hold rating for Wendy's shares, while Loop Capital has maintained a Buy rating with a price target of $26.00. Evercore ISI, however, has adjusted its outlook on Wendy's, reducing the price target to $20.00.
In terms of expansion, Wendy's is set to establish 250 to 300 new outlets in Ireland, Romania, and New Zealand by 2024. These are the recent developments shaping Wendy's performance and strategy.
InvestingPro Insights
To complement Loop Capital's analysis of Wendy's (NASDAQ:WEN) performance, recent data from InvestingPro offers additional context for investors. As of the last twelve months ending Q2 2024, Wendy's reported a revenue of $2.2 billion, with a modest growth of 1.72%. This aligns with the same-store sales growth trends observed by Loop Capital, indicating a steady but moderate expansion in the company's business.
InvestingPro Tips highlight that Wendy's has maintained dividend payments for 22 consecutive years and currently offers a significant dividend yield of 5.67%. This could be particularly attractive to income-focused investors, especially given the company's ability to sustain dividends even during challenging periods in the fast-food industry.
The company's P/E ratio stands at 18.01, which, when considered alongside the InvestingPro Tip noting that Wendy's is trading at a high P/E ratio relative to near-term earnings growth, suggests investors are pricing in future growth expectations. This valuation metric could be worth monitoring in light of the recent same-store sales performance reported by Loop Capital.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide deeper insights into Wendy's financial health and market position. These additional tips, along with real-time metrics, can help investors make more informed decisions about Wendy's stock in the context of the fast-food industry's competitive landscape.
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