The Wendy's Company
) is set to report first quarter 2014 results on May 8, 2014.
Last quarter, it posted a 10.0% positive surprise. Let's see how
things are shaping up for this announcement.
Factors to Consider
Though the company's bottom line has improved due to its cost
saving initiatives, the top line has been a drag for quite some
time, missing the consensus mark through 2013. The system
optimization initiative (completed in Mar 2014) has been
affecting revenues. This initiative called for transition to a
franchised based model. Per this initiative, the company sold its
418 company-operated restaurants to various franchisees.
Though the initiative is complete, these franchised based
models would not generate the same amount of sales for the
company as a company owned restaurant. Therefore, we do not
expect revenues to improve much this quarter. However,
international expansion, refurbishment of units, and an extensive
menu bode well for the company and would offset the negative
impacts to some extent.
We also anticipate margins to be hurt by the recent hike in
beef prices and other commodities. Currently, beef prices are
soaring and have hit their highest level in almost three
Our proven model does not conclusively show that Wendy's is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not
the case here as you will see below.
Negative Zacks ESP:
Expected Surprise Prediction or ESP, which represents the
difference between the Most Accurate estimate and the Zacks
Consensus Estimate, is at -20.0%.
Wendy's Zacks Rank #3 (Hold) when combined with a negative ESP
makes surprise prediction difficult. Note that the Sell-rated
stocks (#4 and 5) should never be considered going into an
Stocks to Consider
Here are some companies in the restaurant industry and broader
retail-wholesale sector that you may want to consider as our
model shows that they have the right combination of elements to
post an earnings beat this quarter:
ADVANCE AUTO PT (AAP): Free Stock Analysis
BIG LOTS INC (BIG): Free Stock Analysis
TIM HORTONS INC (THI): Free Stock Analysis
WENDYS CO/THE (WEN): Free Stock Analysis
To read this article on Zacks.com click here.
Tim Hortons Inc.
) with Earnings ESP of +3.28% and a Zacks Rank #3.
Advance Auto Parts Inc.
) with Earnings ESP of +5.12% and a Zacks Rank #3.
Big Lots Inc.
) with Earnings ESP of +2.27% and a Zacks Rank #3.