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Wendy's Gains on Dividend Hike, Solid Q3 Preliminary Sales

Zacks Equity Research

The Wendy's Company WEN announced preliminary third-quarter 2019 same-store sales. The company also increased quarterly dividend, and provided 2020 as well as long-term guidance. Following the aforementioned news, shares of Wendy’s gained 4% on Oct 11. In fact, the stock has gained 35% year to date, compared with the industry’s rally of 23.6%.

Notably, the company declared a 20% hike in quarterly dividend to 12 cents a share (or 48 cents annually) from the prior payout of 10 cents (or 40 cents annually). The dividend yield, based on the new payout and the last closing market price, is approximately 2.3%. The raised dividend will be paid out on Dec 16 to stockholders on record as of Dec 2.

Preliminary Q3 Same Store Sales & Long-term View

Per the company’s preliminary results, global systemwide sales and North America same-restaurant sales improved 5.7% and 4.4% year over year, respectively. The company now expects systemwide sales to be at the high end of earlier guided range of 3-4%.

The company now anticipates 2020 global systemwide sales to be in the range of $12 billion to $12.5 billion, compared with prior guidance of $11.5 billion. In 2020, Wendy's anticipates adjusted ENITDA to be nearly $425 million to $435 million.

Wendy's also provided outlook for the period between 2021 and 2024. The company expects annual global systemwide sales growth of nearly 4-5%. It also anticipates adjusted EBITA in the high-single digit.

Breakfast Launch Nationwide

In the previous month, the company announced its intention to launch its breakfast menu across the United States by next year. At present, the breakfast menu is available in more than 300 restaurants nationwide.

President and CEO of The Wendy's, Todd Penegor stated “We are well-positioned to pursue it. We believe we have the right team and structure in place, and we put Wendy's fan favorites on our breakfast menu to set us apart from the competition.”

According to Wendy's, it will spend around $20 million for the roll out of the breakfast menu. In fact, the company has trimmed 2019 guidance due to the investment in breakfast plans.

Zacks Rank & Stock to Consider

Wendy's has a Zacks Rank #3 (Hold). Better-ranked stocks in the same space include Brinker International, Inc. EAT, Chipotle Mexican Grill, Inc. CMG and Cracker Barrel Old Country Store, Inc. CBRL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rate of Brinker International, Chipotle Mexican Grill and Cracker Barrel Old Country Store is currently pegged at 5.9%, 18.4% and 9.5%, respectively.

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