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What to Expect from Wendy's (WEN) this Earnings Season?

Fast-food chain, The Wendy's CompanyWEN , is slated to release fourth-quarter and full-year 2016 results on Feb 16, before the market opens.

Last quarter, Wendy's posted a 10% positive earnings surprise. In fact, the company's earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 28.38%.

Wendy's Company (The) Price and EPS Surprise

Wendy's Company (The) Price and EPS Surprise | Wendy's Company (The) Quote

Let's see how things are shaping up for this announcement.

Factors to Consider

The third quarter of 2016 marked the 15th consecutive quarter of positive same-store sales growth, indicating long-term strength and relevance of the brand. We expect Wendy's solid menu pipeline, limited time offers (LTO), marketing initiatives as well as increased emphasis on core and price value offerings, to maintain the trend in the fourth quarter as well.

Additionally, increased investments in technology like mobile payment, mobile ordering and customer self-order kiosks should quicken service, thereby resulting in increased customer count. Re-imaging of restaurants is also expected to increase traffic and drive higher sales at its restaurants.

However, Wendy's revenues have been declining year over year over the past few quarters due to the reduction in the number of company-operated restaurants as a result of its system optimization initiative. The reduction is expected to continue into the to-be-reported quarter as well, which could weigh on revenues again. Furthermore, a soft consumer spending environment in the U.S. restaurant space might further hurt traffic and thereby comps in the to-be-reported quarter.

Earnings Whispers

Our proven model does not conclusively show that Wendy's is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Earnings ESP for Wendy's stands at 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 9 cents per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Wendy's currently carries a Zacks Rank #3, which when combined with an ESP of 0.00% makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the broader Retail-Wholesale sector to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Carrols Restaurant Group, Inc. TAST has an Earnings ESP of +16.67% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Papa John's International, Inc. PZZA has an Earnings ESP of +4.55% and a Zacks Rank #2.

SpartanNash Company SPTN has an Earnings ESP of +2.04% and a Zacks Rank #2.

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Wendy's Company (The) (WEN): Free Stock Analysis Report

Papa John's International, Inc. (PZZA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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