We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Investors Should Steer Clear of Wendy's Stock Now
Read MoreHide Full Article
The Wendy's Company (WEN - Free Report) continues to grapple with strong headwinds, including inflationary pressures on beef and fries, higher commodity costs and rising labor expenses. Also, increased investments in breakfast menu advertising are putting pressure on its margins.
Shares of WEN have lost 14.6% in the past year against the Zacks Retail - Restaurants industry’s growth of 6.6%. WEN also underperformed the broader Retail-Wholesale sector and the S&P 500 index's 30.8% and 26.1% growth, respectively, during the same period.
Earnings estimates for the fiscal 2025 have moved south to $1.03 per share from $1.04 in the past 60 days. This depicts analysts' concern over the company’s growth prospects.
Image Source: Zacks Investment Research
Let us discuss the factors affecting this Zacks Rank #4 (Sell) company’s growth potential.
Factors Impacting WEN Stock
Wendy's is facing significant challenges, including rising labor costs and a decline in customer counts, which are negatively impacting profitability. Also, the company continues to experience inflationary pressures, particularly on beef and fries, adding to the cost pressure.
During the first nine months of fiscal 2024, the global company-operated restaurant margin was 15.2% compared with 15.1% in the prior year. During the said time frame, the U.S. company-operated restaurant margin was 15.8% compared with 15.9% a year ago. This downside was due to higher labor costs and reduced customer count, though this was partly offset by an increased average check and labor efficiencies.
Rising costs and ongoing investments are negatively impacting the company’s financial performance. In the third quarter and first nine months of fiscal 2024, adjusted EBITDA was down 2.9% year over year to $139.2 million and 0.8% to $409.3 million, respectively. This downtick was due to an incremental investment in breakfast advertising, higher depreciation, an increase in general and administrative expenses, and a lower U.S. company-operated restaurant margin.
For fiscal 2024, the company expected labor inflation to be within the 3-5% range, indicating ongoing pressures in the labor market and the need for continued cost management strategies to maintain profitability.
While the company intends to strategically adjust select menu prices and product offerings to mitigate the challenges, potential delays in implementation and competitive pressures may hinder its ability to offset cost increases fully.
Stocks to Consider
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
CMG delivered a trailing four-quarter earnings surprise of 9.8%, on average. The stock has surged 34.8% in the past year. The consensus estimate for CMG’s 2025 sales and earnings per share (EPS) indicates growth of 12.8% and 17.9%, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) presently has a Zacks Rank #2. EAT delivered a trailing four-quarter earnings surprise of 12.1%, on average. The stock has surged 222.5% in the past year.
The consensus estimate for EAT’s fiscal 2025 sales and EPS indicates growth of 9.3% and 44.2%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) currently carries a Zacks Rank of 2. SHAK delivered a trailing four-quarter earnings surprise of 18.3%, on average. The stock has gained 89.6% in the past year.
The Zacks Consensus Estimate for SHAK’s 2025 sales and EPS indicates a rise of 14.7% and 42%, respectively, from the year-ago period’s levels.
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report predicting the 7 stocks that will soar highest in the coming month.
Image: Bigstock
Here's Why Investors Should Steer Clear of Wendy's Stock Now
The Wendy's Company (WEN - Free Report) continues to grapple with strong headwinds, including inflationary pressures on beef and fries, higher commodity costs and rising labor expenses. Also, increased investments in breakfast menu advertising are putting pressure on its margins.
Shares of WEN have lost 14.6% in the past year against the Zacks Retail - Restaurants industry’s growth of 6.6%. WEN also underperformed the broader Retail-Wholesale sector and the S&P 500 index's 30.8% and 26.1% growth, respectively, during the same period.
Earnings estimates for the fiscal 2025 have moved south to $1.03 per share from $1.04 in the past 60 days. This depicts analysts' concern over the company’s growth prospects.
Image Source: Zacks Investment Research
Let us discuss the factors affecting this Zacks Rank #4 (Sell) company’s growth potential.
Factors Impacting WEN Stock
Wendy's is facing significant challenges, including rising labor costs and a decline in customer counts, which are negatively impacting profitability. Also, the company continues to experience inflationary pressures, particularly on beef and fries, adding to the cost pressure.
During the first nine months of fiscal 2024, the global company-operated restaurant margin was 15.2% compared with 15.1% in the prior year. During the said time frame, the U.S. company-operated restaurant margin was 15.8% compared with 15.9% a year ago. This downside was due to higher labor costs and reduced customer count, though this was partly offset by an increased average check and labor efficiencies.
Rising costs and ongoing investments are negatively impacting the company’s financial performance. In the third quarter and first nine months of fiscal 2024, adjusted EBITDA was down 2.9% year over year to $139.2 million and 0.8% to $409.3 million, respectively. This downtick was due to an incremental investment in breakfast advertising, higher depreciation, an increase in general and administrative expenses, and a lower U.S. company-operated restaurant margin.
For fiscal 2024, the company expected labor inflation to be within the 3-5% range, indicating ongoing pressures in the labor market and the need for continued cost management strategies to maintain profitability.
While the company intends to strategically adjust select menu prices and product offerings to mitigate the challenges, potential delays in implementation and competitive pressures may hinder its ability to offset cost increases fully.
Stocks to Consider
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
Chipotle Mexican Grill, Inc. (CMG - Free Report) presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
CMG delivered a trailing four-quarter earnings surprise of 9.8%, on average. The stock has surged 34.8% in the past year. The consensus estimate for CMG’s 2025 sales and earnings per share (EPS) indicates growth of 12.8% and 17.9%, respectively, from the year-ago period’s levels.
Brinker International, Inc. (EAT - Free Report) presently has a Zacks Rank #2. EAT delivered a trailing four-quarter earnings surprise of 12.1%, on average. The stock has surged 222.5% in the past year.
The consensus estimate for EAT’s fiscal 2025 sales and EPS indicates growth of 9.3% and 44.2%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) currently carries a Zacks Rank of 2. SHAK delivered a trailing four-quarter earnings surprise of 18.3%, on average. The stock has gained 89.6% in the past year.
The Zacks Consensus Estimate for SHAK’s 2025 sales and EPS indicates a rise of 14.7% and 42%, respectively, from the year-ago period’s levels.