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Services Stocks Updates: Wendy’s Company (NASDAQ: WEN)

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On Wednesday, Shares of Wendy’s Company (NASDAQ: WEN), gains 5.17 percent and now trading at $15.89 in the current trading session. The current trading range of the stock ranges between $15.30 and $16.12.

  • North America same-restaurant sales increase 1.60 percent (+5.20 percent on a 2-year basis); 17th successive quarter of positive same-restaurant sales
  • 00 worldwide restaurant openings throughout 1st– quarter of 2017
  • Company reiterates 2020 G&A cost savings target of around $35.00M; anticipates to achieve approximately 3-quarters of savings by end of 2018

The Wendy’s Company (NASDAQ: WEN) recently stated unaudited results for the 1st– quarter finished April 2, 2017.

“We are glad with our solid1st- quarter results as we were able to deliver high quality of earnings despite tough prior year comparisons,” President and Chief Executive Officer Todd Penegor said. “Driven by our continued focus on profitably growing customer counts with a balanced marketing plan, we have now recorded 17.00 successive quarters of positive same-restaurant sales in North America. In addition to consistently delivering solid same-restaurant sales, we continue to build momentum towards our global expansion aims with 33.00 total new restaurant openings during the1st- quarter. Together with our outstanding and dedicated franchisees, we remain committed to our brand purpose of creating joy and opportunity through our food, family and community, and delighting every client.”

Financial Highlights:

  • Total revenues were $285.80M in the1st- quarter of 2017, contrast to $378.80M in the1st- quarter of 2016. The 24.60 percent decline resulted mainly from the ownership of 301.00 fewer Company-operated restaurants at the end of the1st- quarter 2017 contrast to the starting of the1st- quarter 2016, which resulted in fewer sales at Company-operated restaurants, partly offset by higher franchise royalty revenue and fees and franchise rental income.
  • Company-operated restaurant margin was 16.70 percent in the1st- quarter of 2017, contrast to 17.20 percent in the1st- quarter of 2016. The 50.00 basis-point decline was mainly the result of increased labor rates, partly offset by lower commodity costs.
  • General and administrative cost was $52.40M in the1st- quarter of 2017, contrast to $64.70M in the1st- quarter of 2016. The 19.00 percent decline resulted mainly from lower professional fees and legal reserves, a YOY decline in incentive compensation accruals and cost savings related to the Company’s system optimization program.
  • Operating profit was $60.70M in the1st- quarter of 2017, contrast to $63.80M in the1st- quarter of 2016. The 4.90 percent decline resulted mainly from a year-over-year increase in other operating cost that was related to a lease buyout gain recognized in the1st- quarter of 2016, partly offset by lower depreciation and amortization cost and reorganization and realignment costs, in addition to the items talked approximately above.
  • Net income was $22.30M in the1st- quarter of 2017, contrast to $25.40M in the1st- quarter of 2016. The 12.20 percent decline resulted mainly from the items talked approximately above.
  • Adjusted EBITDA was $89.20M in the1st- quarter of 2017, contrast to $98.10M in the1st- quarter of 2016. The 9.10 percent decline resulted mainly from a YOY increase in other operating cost that was related to a lease buyout gain recognized in the1st- quarter of 2016 and the ownership of 301.00 fewer Company-operated restaurants at the end of the1st- quarter of 2017 contrast to the starting of the1st- quarter of 2016.
  • Adjusted EBITDA margin (adjusted EBITDA divided by total revenues) was 31.20 percent in the1st- quarter of 2017, contrast to 25.90 percent in the1st- quarter of 2016. The 530.00 basis-point improvement reflects the positive impact of the Company’s system optimization program.
  • Stated diluted earnings per share were $0.090 in the1st- quarter of 2017, contrast to $0.090 in the1st- quarter of 2016.
  • Adjusted earnings per share were $0.090 in the1st- quarter of 2017, contrast to $0.110 in the1st- quarter of 2016. The 18.20 percent decline resulted mainly from the items talked approximately above and reflects a 7.00 percent YOY reduction in the weighted average diluted shares outstanding.
  • Cash flows from operations were $38.60M in the1st- quarter of 2017, contrast to $50.80M in the1st- quarter of 2016. The 24.00 percent decline was mainly the result of a increase in working capital and YOY declines in net receipt of deferred vendor incentives and net income.
  • Capital expenditures were $14.80M in the1st- quarter of 2017, contrast to $38.80M in the1st- quarter of 2016.
  • Free cash flow (cash flows from operations minus capital expenses) was $23.80M in the1st- quarter of 2017, contrast to $12.00M in the1st- quarter of 2016. The 98.30 percent boost resulted mainly from a year-over-year decline in capital expenses, in addition to the items talked approximately above.
  • Company gives extra details regarding G&A cost savings program
  • As previously declared at the Company’s investor Day on February 16, 2017, the Company anticipates to reduce G&A cost to approximately 1.50 percent of worldwide systemwide sales by 2020 on its path to an adjusted EBITDA margin of 38.00 to 40.00 percent. Approximately three-quarters of the total G&A cost reduction of approximately $35.00M is expected to be realized by the end of 2018, with the remainder of the savings being realized in 2019. The Company anticipates to incur total costs aggregating approximately $28.00M to $33.00M, of which $23.00M to $27.00M will be cash expenses, related to these savings. The cash expenses are expected to begin in the 2nd- half of 2017 and continue into 2019, with approximately half of the total cash expenses occurring in 2018.

Image Activation:

Image Activation, which includes reimaging existing restaurants and building new restaurants, remains an integral part of our worldwide development strategy. With 33.00 percent of the worldwide system featuring the new image, the Company and its franchisees continue to expect to have approximately 42.00 percent of the worldwide system image activated by the end of 2017. The Company is reiterating its 2017 net new unit growth expectations of approximately 1.00 percent in North America and approximately 12.50 percent in International.

The Company continues to facilitate franchisee-to-franchisee restaurant transfers (“Buy and Flips”) in order to ensure restaurants are operated by well-capitalized franchisees that are committed to long-term growth. Throughout the1st- quarter the Company facilitated 116.00 Buy and Flips and now anticipates to complete approximately 475.00 in 2017, which exceeds the original target by 75.00.

Company declares quarterly dividend:

  • The Company declared recently the declaration of its regular quarterly cash dividend of $0.070 per share, payable on June 15, 2017, to shareholders of record as of June 1, 2017. The number of common shares outstanding as of May 4, 2017 was 245.50M.
  • Company repurchases 1.30M shares for $17.80M in1st- quarter
  • The Company repurchased 1.30M shares for $17.80M in the1st- quarter at an average price of $13.5 per share. The Company has approximately $132.00M remaining on its existing $150.00M share repurchase authorization, which expires March 4, 2018.

2017 outlook:

This release includes forward-looking guidance for certain non-GAAP financial measures, counting adjusted EBITDA, adjusted earnings per share and adjusted tax rate. The Company excludes certain costs and benefits from adjusted EBITDA, adjusted earnings per share and adjusted tax rate, such as impairment of long-lived assets, reorganization and realignment costs and system optimization gains, net.  Because of the uncertainty and variability of the nature and amount of those costs and benefits, the Company is unable without unreasonable hard work to give projections of net income, earnings per share or stated tax rate or a reconciliation of projected adjusted EBITDA, adjusted earnings per share or adjusted tax rate to projected net income, earnings per share or stated tax rate.

Throughout 2017, the Company now anticipates:

  • Adjusted EBITDA of approximately $400.00 to $406.00M, a increase of approximately 2.00 to 4.00 percent contrast to 2016.
  • Company-operated restaurant margin of approximately 18.50 percent.
  • Commodity cost inflation of approximately 1.50 to 2.00 percent contrast to 2016.
  • General and administrative cost at the low end of its formerly issued range of approximately $210.00 to $220.00M.

In addition, the Company continues to expect:

  • Adjusted earnings per share of approximately $0.450 to $0.470, a increase of approximately 13.00 percent to 18.00 percent contrast to 2016.
  • Same-restaurant sales development of approximately 2.00 to 3.00 percent for the North America system.
  • Labor inflation of approximately 4.00 percent.
  • Interest cost of approximately $115.00M.
  • Depreciation and amortization cost of approximately $120.00M, counting accelerated depreciation of approximately $2.00M.
  • Cash flows from operations of approximately $240.00 to $275.00M.
  • Capital expenditures of approximately $80.00 to $90.00M.
  • Free cash flow of approximately $160.00 to $185.00M.
  • An adjusted tax rate of approximately 32.00 to 34.00 percent.
  • Company on track to achieve 2020 aims

The Company continues to expect to achieve the following aims by the end of 2020:

  • Worldwide systemwide sales (in constant currency and apart from Venezuela) of ~$12.00 billion.
  • Global restaurant count of ~7,500.00
  • Global Image Activation of at least 70.00 percent.
  • Adjusted EBITDA margin of 38.00 to 40.00 percent.
  • Free cash flow of ~$275.00M (capital expenditures of ~$65.00M).

Conference call and webcast planned for 9:00 a.m. recently, May 10:

The Company will host a conference/discussion call recently at 9 a.m. ET, with a simultaneous webcast from the investors section of the Company’s website. The live conference call will be accessible at (877) 572-6014 or, for global callers, at (281) 913-8524. An archived webcast will be accessible on the Company’s website .

Analyst recommendation for this stock stands at 2.50.