Wendy’s Stock Takes a Dip Despite Beating Earnings Estimates
Wendy’s Co. (WEN) shares experienced a decline following the release of their third-quarter 2024 earnings report, despite exceeding revenue expectations. While the company reported a 2.9% year-over-year increase in revenue, reaching $566.7 million, surpassing the analyst consensus estimate of $560.75 million, profits were impacted by various factors.
Key Takeaways:
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Revenue Growth:
Wendy’s achieved a 2.9% increase in revenue, exceeding analyst expectations.*
Adjusted Revenue:
Adjusted revenues saw a more modest increase of 0.5% to $443.6 million.*
Same-Restaurant Sales:
Global same-restaurant sales, a key indicator of performance, saw a growth of only 0.2%. This is likely influenced by factors such as rising inflation and consumer spending patterns.*
Profitability:
Operating profit for the quarter declined by 6.8% year-over-year, reaching $94.7 million. This dip can be attributed to increased breakfast advertising costs, higher depreciation expenses, and a rise in general and administrative expenses.*
EBITDA:
Adjusted EBITDA came in at $135.2 million, compared to $139.2 million in the same period last year.*
Earnings Per Share:
Adjusted EPS stood at 25 cents, aligning with the consensus estimate.*
Financial Position:
As of June, Wendy’s held a strong cash position of $482.2 million, along with $35.180 million in restricted cash. The company also generated healthy operating and free cash flows for the first nine months of the year.*
Share Buybacks:
Wendy’s repurchased 1.5 million shares for $25.2 million in the third quarter and an additional 0.2 million shares for $2.7 million in October. The company has a remaining $247.7 million available for share repurchases under its current authorization.*
Dividend:
Wendy’s declared its regular quarterly cash dividend of 25 cents per share, payable on December 16, to shareholders of record as of December 2.*
2024 Outlook:
Despite the decline in profits, Wendy’s remains optimistic about the full year. The company revised its adjusted EPS guidance to $0.99-$1.01 (previously $0.98-$1.02). They also maintained their adjusted EBITDA guidance of $535 million-$545 million and revised their global systemwide sales growth to 3% (previously 3% to 5%).Investor Perspective
While Wendy’s did manage to exceed revenue expectations, the decline in profitability raises concerns among investors. The company’s focus on digital and loyalty platforms, aimed at driving customer engagement and sales, is a positive sign. However, the increased advertising costs and operational expenses suggest the company may be facing challenges in maintaining profitability, particularly in the face of economic headwinds.
The Bottom Line
Wendy’s Q3 2024 earnings report presented a mixed bag of results. While the company delivered on revenue expectations, the decline in profits and the revised outlook for the full year suggest that the company may be facing some headwinds in the near term. Investors will be closely watching how Wendy’s navigates these challenges and whether their strategies for growth will prove effective in the long term.
