Wendy's Fourth Quarter Will Look Good -- Worry About 2014

Wendy's reports fourth-quarter results on Thursday but the company already provided the juicy data last month. Can the company continue the comps streak with its revolving menu?

Feb 26, 2014 at 3:30PM

Wendy's (NASDAQ:WEN) will report fourth-quarter results on Thursday but most of the company's (unaudited) data was already spilled in a preliminary release last month. The company beat McDonald's (NYSE:MCD) and Burger King Worldwide (NYSE:BKW) on comparable-store sales after striking gold with the popular pretzel bun sandwiches. Can Wendy's continued commitment to limited-time items carry the good times on through 2014?

The company's sandwich launches in the past year have included the Pretzel Bacon Cheeseburger, the Pretzel Pub Chicken, the relaunch of a burger updated with a brioche bun, two chipotle-sauced sandwiches for the value menu, and the newly announced Premium Cod. McDonald's and Burger King have both recently blamed their introductions of too many products for their slumping comps. 

Here's what to expect from Wendy's fourth-quarter results -- and why 2014 might prove to be a bumpier ride. 

Wendys Cod

Source: Wendy's 

Preliminary fourth-quarter results 
Wendy's reported a 3.1% comps increase at company-owned stores and 2.8% growth at North American franchise stores. Those figures compare to last year's comps losses of 0.2% and 0.6%, respectively. Wendy's attributed the growth to the successful Pretzel Pub Chicken sandwich and the Bacon Portabella Melt on Brioche promotion. Both sandwiches were limited-time offers. Unaudited revenue for Wendy's was $592.4 million -- a 6% year-over-year drop the company attributed to the conversion of company-owned stores to franchises.

For the full year, Wendy's comps were only up 1.9% at company-owned stores from 1.6% in 2012. The small change shows how much the accelerated comps for the latter part of the year helped boost the weaker start. The acceleration was largely due to the immense success of the Pretzel Bacon Cheeseburger, which drove the third quarter to deliver the chain's highest comps in eight years. However, again, this strength has all come from limited-time products that are falling off the menu in favor of the Premium Cod sandwich and other new, short-term items. 

2014 outlook overly optimistic? 
Wendy's forecast full-year comps growth of 2.5-3.5% for company-owned stores along with earnings per share of $0.34-$0.36. The EPS projection matches analysts' consensus estimate. However, the comps growth projection seems a bit optimistic. 

Compare the comps Wendy's posted last year to those of Burger King and McDonald's: 













Burger King












Source: Company filings. Wendy's comps represent the average of company-owned and franchise-owned comps. Burger King and McDonald's comps represent their global performance. 

Wendy's has beaten its competitors on comps since the start of the year. The comps from early 2013 could represent more customers coming back toward Wendy's higher-priced items as the economy improves. And Wendy's could benefit from having a smaller fleet of locations than its competitors, which tends to create less risk of closely spaced Wendy's stores stealing customers from each other. At the end of the third quarter, Wendy's had about 6,500 locations while McDonald's and Burger King finished the fourth with 35,000 and 13,000, respectively.    

The nearly 3% bump between the second and third quarters came from the success of the Pretzel Bacon Cheeseburger. The fourth quarter started to show a deceleration as the Bacon Cheeseburger and Pretzel Pub Chicken moved off the menu. 

So Wendy's could achieve its 2014 full-year comps forecast -- if the company manages to keep sandwiches as popular as the pretzel bun offerings on the menu all year. With the company's devotion to moving products through at a near break-neck pace, that might prove a difficult task to accomplish. 

Foolish final thoughts 
The fourth-quarter report will still merit a read for any clarifying comments and some of the more in-depth financial metrics. However, the preliminary results provided more clues that Wendy's might not maintain its competitor-thumping comps if the newer limited-time sandwiches don't drive the same type of attention as last year's launches did. 

Hungry for a new investment opportunity? 

Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Brandy Betz has no position in any stocks mentioned. The Motley Fool recommends Burger King Worldwide and McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers