Wendy’s Receives a Hold from J.P. Morgan

By Carrie Williams

J.P. Morgan analyst John Ivankoe reiterated a Hold rating on Wendy’s (NASDAQ: WEN) today and set a price target of $11.50. The company’s shares opened today at $11.44, close to its 52-week high of $11.65.

Ivankoe said:

“Wendy’s 3Q16 Adj. EPS of $0.11 was in-line with our $0.11 and was vs $0.09 last year. Revenue is often difficult to predict as the company undergoes refranchising efforts and 3Q16 revenue of $364m consisting of $229m of company-owned revenue and $135m of franchise revenue was vs our $357m consisting of $221m of company-owned revenue and $136m franchise revenue with the delta for company-owned revenue due to longer ownership of company stores. System comps of 1.4% (mostly traffic) consisted of 2.7% at company- owned stores and 1.3% at franchise stores and all were vs our 1%. Store margins were 18.4% vs our 18.8% expectation and Adj. EBITDA was $100m vs our $99m and was relatively flat y/y despite 433 fewer company-owned stores y/y, which was offset by franchise royalty income, franchise fees, and rental income. Adj. EBITDA margin of 27.5% was vs 21.5% last year or +600bps y/y. Full details of the EPS upside / downside can be found on Table 1of our note. Completed 10 Nov 2016 02:11 AM EST Disseminated 10 Nov 2016 02:15 AM EST This document is being provided for the exclusive use of nanik.k.bhojwani@jpmorgan.com & clients of J.P. Morgan.”

According to TipRanks.com, Ivankoe is a 4-star analyst with an average return of 6.4% and a 58.7% success rate. Ivankoe covers the Services sector, focusing on stocks such as The Chefs’ Warehouse, Cheesecake Factory, and McDonald’s Corp.

Currently, the analyst consensus on Wendy’s is Moderate Buy and the average price target is $11.33, representing a -1.0% downside.

In a report released today, RBC Capital also reiterated a Hold rating on the stock with a $11 price target.

Wendy’s’ market cap is currently $2.98B and has a P/E ratio of 21.05. The company has a book value ratio of 4.3039.

Based on the recent corporate insider activity of 43 insiders, corporate insider sentiment is positive on the stock. This means that over the past quarter there has been an increase of insiders buying their shares of WEN in relation to earlier this year.

The Wendy’s Co. is a quick-service hamburger company. The company operates through its subsidiaries, which include Wendy’s Restaurants, LLC and Wendy’s International, Inc. It provides various hamburgers and related products such as chicken breast sandwiches, nuggets, chili, baked potatoes, french fries, freshly prepared salads, soft drinks, milk, coffee, frosty deserts and kids meals. Wendy’s was founded by R. David Thomas on November 15, 1969 and is headquartered in Dublin, OH.