Wendy's (WEN) Q4 Earnings Surpass Estimates, Increase Y/Y
The Wendy's Company WEN reported fourth-quarter fiscal 2022 results, with earnings beating the Zacks Consensus Estimate and revenues meeting the same. The top and bottom lines increased on a year-over-year basis.
President and Chief Executive Officer Todd Penegor stated, “In the fourth quarter, our breakfast sales accelerated while our global digital business reached record highs, and over the course of the year we opened over 275 restaurants across the globe despite a difficult operating environment. We anticipate our significant business momentum and the sound execution of our key priorities will deliver a new gear of efficient, accelerated growth for the next several years.
Q4 Earnings & Revenues
For the fiscal fourth quarter, the company reported adjusted earnings per share (EPS) of 22 cents, beating the Zacks Consensus Estimate of 20 cents. In the prior-year quarter, WEN reported an adjusted EPS of 16 cents.
The Wendy's Company Price, Consensus and EPS Surprise
The Wendy's Company price-consensus-eps-surprise-chart | The Wendy's Company Quote
During the quarter, the company reported revenues of $536.5 million, meeting the consensus mark. The top line increased 13.4% on a year-over-year basis. The upside was primarily driven by higher sales at company-operated restaurants (which benefited from the acquisition of 93 franchise-operated restaurants in Florida in fourth-quarter 2021) and higher same-restaurant sales. Also, a rise in franchise royalty revenues and advertising funds revenues added to the upside.
During the quarter under review, same-restaurant sales at international restaurants (excluding Venezuela and Argentina) rose 9.9% year over year compared with growth of 18.1% in the year-ago quarter. Comps at Global restaurants rose 6.4% year over year compared with a 7.3% increase reported in the prior-year quarter. Comps in the United States witnessed an improvement of 5.9% year over year compared with an increase of 6.1% in the prior-year quarter.
In the quarter under review, Wendy’s inaugurated 78 restaurants globally, reflecting an increase of 15 net new units.
System-Wide Sales Discussion
During the fiscal fourth quarter, global system-wide sales — including company-operated and franchise restaurants — were nearly $3.4 million, up 7.9% year over year. During the quarter under review, system-wide sales in the U.S. and the International segments were approximately $3 million and $0.4 million, up 7.2% and 12.8% year over year, respectively.
Operating Highlights
During the fiscal fourth quarter, the company-operated restaurant margin came in at 14.5%. The margins were flat (on a year-over-year basis) primarily due to a higher average check, offset by higher commodity costs, customer count declines, higher labor costs, and increased investments (to support the entry into the United Kingdom market).
General and administrative expenses in the quarter were $68.5 million compared with $64.4 million reported in the prior-year quarter. The increase was mainly due to a rise in salaries and benefits partially offset by lower incentive compensation accrual.
Quarterly operating profit amounted to $84 million, up 9.2% from the year-ago quarter. The increase was backed by solid contributions from franchise royalty and advertising funds revenue.
Net income during the fiscal fourth quarter was $41.3 million, down 20.8% from $52.1 million reported in the year-ago quarter.
Adjusted EBITDA during the quarter totaled $123.5 million, up 20.3% from $102.7 million reported in the prior-year quarter. The increase was primarily backed by higher franchise royalty revenue, higher sales at Company-operated restaurants, a lower incremental Company investment in breakfast advertising and higher other operating income.
Balance Sheet
Cash and cash equivalents as of Jan 1, 2023, totaled $745.9 million compared with $731.8 million on Oct 2, 2022. Inventories at the end of the fiscal fourth quarter amounted to $7.1 million compared with $6.6 million reported in the previous quarter. As of Jan 1, 2023, long-term debt was $2,822.2 million compared with $2,827.5 million at the end of Oct 2, 2022.
The company declared a quarterly dividend of 25 cents per share. The dividend will be paid out on Mar 15, 2023, to shareholders on record as of Mar 1, 2023.
2022 Highlights
Total revenues in 2022 amounted to $2,095.5 million compared with $1,897 million in 2021.
Adjusted EBITDA in 2022 came in at $497.8 million compared with $467 million in 2021.
In 2022, diluted EPS came in at 86 cents per share compared with 82 cents reported in the previous year.
2023 Outlook
For 2023, the company now expects global system-wide sales growth to be in the range of 6-8%. Adjusted EBITDA is projected in the band of $530-$540 million. Adjusted EPS for 2023 is anticipated to be in the range of $0.95-$1. The Zacks Consensus Estimate for 2022 earnings is pegged at 97 cents.
The company anticipates cash flow from operations to be in the band of $340-$360 million, while capital expenditures are projected between $75 million and $85 million. Free cash flow is anticipated to be $265-$275 million.
Zacks Rank & Key Picks
Wendy's currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Chuy's Holdings, Inc. CHUY, Arcos Dorados Holdings Inc. ARCO and Brinker International, Inc. EAT.
Chuy’s Holdings currently sports a Zacks Rank #1. CHUY has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 15.2% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings 2023 sales and EPS suggests growth of 10.8% and 16.1%, respectively, from the corresponding year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth of 11.6%. Shares of the company have increased 6.1% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 8.1% and 4.2%, respectively, from the year-ago period’s levels.
Brinker carries a Zacks Rank #2. EAT has a long-term earnings growth rate of 7.1%. The stock has declined 6.2% in the past year.
The Zacks Consensus Estimate for Brinker’s 2024 sales and EPS suggests growth of 3.9% and 36.5%, respectively, from the year-ago period’s reported levels.
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