Since fast-food restaurants report same-store sales monthly, there are usually few surprises when quarterly earnings are announced. Such was the case when Wendy's (NYSE:WEN) reported that fourth-quarter earnings jumped 27% and that full-year profits were up 8.5%.

The news reports stated that earnings had exceeded analyst estimates. That's what they call on Wall Street a positive surprise. So, where was the surprise?

The analysts' main source of information is the company's own guidance. When Wendy's reported second-quarter results in July, it confirmed previous full-year earnings guidance of $1.97 to $2.03 per share. That was close. Full-year earnings were $2.05 per share. Another positive surprise? Hardly. Early in the year, Wendy's had forecast $2.02 to $2.08 a share.

Fast-forward to Jan. 6, 2004. Fiscal 2003 is over, and Wendy's computers have the latest data. What is the earnings guidance? It's $2.01 to $2.04 a share. The only surprise at this point is why, with all the information, Wendy's couldn't wrap its guidance all the way around $2.05.

Hence, Wendy's surprise when earnings exceeded its Jan. 6 estimate. I can hear Gomer Pyle now: "Surprise, surprise, surprise."

So, how did Wendy's actually do in 2003? Looking at same-store sales, its Tim Horton's restaurants excelled, the actual Wendy's did OK, and Baja Fresh was down. The latter, acquired in 2002 for $275 million, diluted Wendy's earnings to the tune of $0.09 a share for 2003, higher than Wendy's $0.06 to $0.08 per share guidance. Surprise!

Worse was the decline in operating margins from 15.8% to 14.2%. Watch margins going forward, as the supposed cause of the decline -- high beef prices -- should have reversed with the mad cow disease scare.

McDonald's (NYSE:MCD), on the other hand, posted a 1.6% increase in fourth-quarter operating margins to 14.8%. Remember, operating margins had been Wendy's competitive strength -- and they still dwarf Yum! Brands' (NYSE:YUM) 12.3% margins. Still, with Wendy's stock trading at 19.4 times earnings, any margin surprises could pressure the stock.

Wendy's will announce 2004 guidance on Feb. 2. If it's anything like 2003, get ready to be surprised.

To discuss Wendy's -- or fine dining -- with other investors, visit the Wendy's discussion board.

W.D. Crotty owns stock in McDonald's and Yum! Brands.