What happened
Shares of Wendy's Co. (WEN 0.58%) climbed more than 5% on Wednesday afternoon after the restaurant operator reported better-than-expected first-quarter earnings. The gains pushed Wendy's shares to levels unseen since 2007.
So what
Wendy's reported adjusted first-quarter earnings of $0.14 per share on revenue of $408.6 million, surpassing consensus estimates for $0.11 per share in earnings on sales of $399 million. Global systemwide sales grew 3.3% in the quarter, with comparable sales up 1.3%.
Image source: Wendy's Co.
The company is benefiting from both higher franchise fees and the successful introduction of new, higher-cost menu items. Wendy's said operating margin at company-owned restaurants climbed to 15% in the quarter, an improvement of 110 basis points year over year and ahead of the 14.2% consensus estimate.
"We delivered strong earnings growth in the first quarter and are proud of our continued progress to build an even stronger foundation for the Wendy's brand," CEO Todd Penegor said in a statement. "We are executing on our plan to accelerate same-restaurant sales in North America and drive global restaurant expansion, fueled by a healthy restaurant economic model."
Now what
Wendy's was cautious heading into 2019, but the company's shares are up 23% year to date and are now at levels last visited more than a decade ago. The company held firm to full-year guidance, saying it expects fiscal 2019 earnings per share of between $0.61 and $0.63, in line with the consensus $0.62 per-share estimate.
The bottom line is that Wendy's was able to grow margins without sacrificing sales, which suggests improving pricing power. That was reason enough for investors to celebrate.
