Longbow Research analyst Alton Stump maintains a Buy rating on Wendy's stock with an unchanged $25 price target.
Stump's conversations with U.S. Wendys' franchisees focused on a combination of current performance and their thoughts on the breakfast launch. The four key takeaways from the conversations include:
- Spicy chicken nuggets are performing well after launching on Aug. 12 and could have contributed a 100 to 150 basis point lift in comps along with higher traffic and better average ticket size.
- Franchisees expressed an "admittedly surprisingly positive view" of breakfast.
- Franchise owners are positive on breakfast from a combination of a simple menu, notably lower food cost in terms of a percentage of sales, expectations for only a modestly higher labor related expense, and a nationwide roll out instead of regional.
- A multi-daypart advertising campaign will help mitigate incremental dollars spent by either corporate or franchisees next year.
Stump's interactions with franchisees makes the case for franchised same-store sales to be up 3.0% to 3.5% in the third quarter, the analyst wrote. A growth rate of 3.0% or more would be viewed favorably by investors and mark continued momentum after flattish performance in the back half of 2018.
Shares of Wendy's were trading higher by 1% Friday at $19.88.
Wendy's Falls After Revising 2019 Guidance
What To Make Of Wendy's Breakfast Expansion
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