Must-know: Wendy’s quarterly earnings overview

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Must-know: Wendy's quarterly overview for 2Q14 (Part 1 of 9)

Overview of Wendy’s

The Wendy’s Company (WEN), or simply Wendy’s, reported its earnings on August 7, 2014. It operates restaurants across the world under the fast food format. Wendy’s menu includes items such as hamburger sandwiches, chicken breast sandwiches, chili, chicken nuggets, french fries, salads, baked potatoes, and beverages.

As of the second quarter ended June 29, Wendy’s had a total of 6,545 restaurants system-wide. 5,540 of these restaurants were franchised, and 1,005 restaurants were company-operated. To learn more about company-operated and franchise business models, read the series titled “Must-know: Why restaurants are so important to investors.”

Earnings per share

Wendy’s reported a quarterly earnings per share (or EPS) of $0.08 (adjusted EPS of $0.09), which was 33% down, compared to EPS of $0.12 in the first quarter of 2014. The dip in the EPS was primarily due to no income from the restaurants that were no longer part of the company-owned restaurants in the first quarter from system optimization initiatives. For these initiatives, the company has been selling its company-operated restaurants to franchises since 2013. The operating profit margins for company-operated restaurants were 12.2% in the second quarter, compared to 17% in the first quarter.

Peer performance

Wendy’s peer, McDonald’s (MCD) reported an EPS of $1.40, which was up 15%, compared to the EPS of $1.21 in 1Q14. Another peer, Yum! Brands (YUM) reported an EPS of $0.73, which was 16% down, compared to the EPS of $0.87 in 1Q14. An investor interested in the restaurant industry as a whole can get exposure through ETFs such as the Consumer Discretionary Select Sector SPDR Fund (XLY) and the PowerShares Dynamic Food and Beverage ETF (PBJ).

Topics discussed in this quarterly overview

In this quarterly overview series of Wendy’s, we’ll take a deeper look into the earnings, key valuation metrics such as same-store sales, impacts of costs, management’s strategic initiatives for the future, the market reaction to the earnings, and finally the performance of Wendy’s stock year-to-date.

Continue to Part 2

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