Now, Wendy's expects to report earnings per share of $1.09 to $1.23 per share, a far cry from previous guidance of $1.26 to $1.32 per share. Lower-than-planned same-store sales and higher-than-expected commodity expenses are taking this biggie bite out of the company's outlook.
You may recall that back in April, Wendy's shares surged on speculation of a buyout; the company had formed an exploratory committee dedicated to looking at "strategic options." Today's news does give reason to believe that the company is looking to this as a more likely "strategic option" all the time.
I've long been pretty bearish about Wendy's, though; I've had it marked "underperform" in my Motley Fool CAPS page for quite some time (and that's admittedly been a losing call thus far). After it got rid of Tim Hortons
Even with the reduction in its earnings estimates, Wendy's is still expected to report an increase in earnings per share on a year-over-year basis. Of course, that isn't hard to do, considering last year's earnings dropped 56% to $0.32 per share after having been on the downtrend over the last several years.
Of course, it's future growth that we investors are looking for, and Wendy's is expected to grow earnings over the course of the next few years after a couple rough ones -- but it's not hard to see why uncertainties might prevail at the moment, given the competitive landscape and a more certain path to try to sell the company. Wendy's forward P/E of around 33 sounds like a high price to pay, given lackluster performance and a rather unsure view of how growth will pan out, and I can't help but think it's a good idea to steer clear of Wendy's now that buyout mania has become a bit of a shopworn concept.
For more on the Wendy's saga, check out:
Alyce Lomax does not own shares of any of the companies mentioned.