The Wendy’s Company (NASDAQ: WEN)
Wendy’s (NASDAQ:WEN) announced details of its stock buy back program on Wednesday and the market said “I’ll have fries with that.” Wendy’s stock gained $.37, or 3.33% at close on close to 20 million shares of volume on the news they would buy back one third of their market capitalization. They plan to repurchase $1.4 billion from shareholders, with over $200 million of that coming from their top shareholder, Trian Group. Trian currently holds 24.8% of Wendy’s outstanding common stock and will reduce their ownership stake from 24.8 to between 19.68% and 17% over the next few months.
Positive growth outlook
Wendy’s can now forecast better earnings starting with an adjusted EPS growth of more than 20% beginning in 2018. Previous forecasts for growth were in the teen percentages. Wendy’s CFO Todd Penegor remarked on the program: “We are confident our strong balance sheet, financial flexibility and cash flow will enable us to comfortably fund our growth initiatives while returning significant capital to shareholders. We reaffirm our commitment to growing our dividend in line with adjusted earnings per share growth, which we now expect to exceed 20% beginning in 2018, primarily as a result of our new share repurchase authorization.” Compared to McDonald’s (NYSE:MCD), who is having a tough time recently trying to turn around sales and dealing with lowering profits, Wendy’s sales in recent quarters is increasing in spite of strong competition from new comers like Shake Shack (NYSE: SHAK). Wendy’s did lower their full-year EPS outlook from 33-35 cents down to 31-33 cents. Last month the company announced that it was selling its bakery unit so that it can focus on its core business. This restructuring move aligns with McDonald’s recent announcements on core values as well, so that burger joints can compete with the likes of restaurants such as Chipotle Mexican Grill (NYSE:CMG).
WEN Stock Information
Wendy’s stock price is up nearly 23% year to date after a downgrade was issued from Argus last summer from a buy to a hold with a price target of $8.50. The Telsey Advisory Group rated the stock back in February as outperform with a price target upped to $12 from $9. Their last earnings report on May 6th of $0.06 EPS beat estimates of $0.051, which helped boost their stock price back into the $11 range. Before today’s announcement, the stock price had slid back into the $10 range after hitting highs of $11.67, still riding the buzz of the earnings report. Some technical indicators of the stock show it poised for more growth, with an RSI level moving back into the buying range at 61.69. Accumulation remains high and its CMF is still on the positive side.
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Wendy’s Corporate Information
Wendy’s is the third largest burger chain in the U.S. with over 6,400 restaurants worldwide. The company had revenues in excess of $2.1 billion in 2014. Average annual sales per restaurant in the U.S. is $1.59 million. The company has a market capitalization of roughly $4.16 billion as of 6/3/15. They have returned dividends to investors of $0.22 per share over the past year.