Rise in sales

US burger chain Wendy's (NASDAQ:WEN) enjoyed a great momentum in its fiscal third qua"<yoastmarkrter. The company benefited from a rise in customer count as more diners rushed to try new menu items such as the Grilled Chicken Sandwich and the “4 for $4” value meal.

This led to a stronger-than-expected rise in sales, which came despite a recent drop in grocery prices in the US that has urged more people to eat at home.

The growth allowed the company to close its 15th consecutive quarter of “positive same-restaurant sales,” Wendy's said in its third quarter financial report. The company has performed nicely on the trade front as well. Its stock moved north 9.51% over the previous week alone.

Over a dozen analysts are covering the chain and insiders have been out in full force over the last several weeks to capitalize on one of the biggest rallies the market has seen in years. Wendy’s is a stock worth keeping an eye on and potentially investing in.

Wendy's then

Wendy's traces its roots back to 1969, when founder Dave Thomas opened the first restaurant in Columbus. In 1972, the first franchise location sprung up in Indianapolis and a couple of years later the burger chain expanded into Canada.

The company reached its 500th restaurant milestone just four years later, opening a new restaurant in Toronto. The same year, the company went public, selling one million common shares on the NASDAQ exchange at a price of $28 apiece.

In 1979, the company pioneered the salad bar, becoming the first fast food chain to introduce the now-discontinued “Superbar.”

At present, the company runs over 6,500 franchise and company restaurants in the US and 29 other countries across the globe. While the number of locations ranks it a distant third to its rivals, McDonald’s and Burger King, it has still managed to remain a strong competitor thanks to its loyal following.

Wendy's now

But let’s get back to the figures. In the third quarter, Wendy's North America same-restaurant sales added 1.4%, beating the Street forecast of 0.9%. Its revenue declined 21.7% in the period to $364.01 million from $464.6 million last year as it operated fewer company-owned restaurants. Despite the drop, the figure was still higher than analysts’ consensus estimate of $350 million.

Net income jumped to $48.89 million from $7.6 million a year earlier, when it recorded a charge from halting its bakery business. Wendy's earned $0.11 a share, outstripping the Street’s average forecast by a cent. Analysts now expect the business to post earnings per share of $0.40 for the current year.


Wendy's declared a quarterly dividend of $0.065 per share, up from $0.06 the previous quarter, an annualized dividend of $0.26 and a yield of 2.26%. It currently has a P/E ratio of 19.65, while the 52-week high/low trading values are $8.89 and $14.03, respectively.

In the report, the company also said its board had given the go-ahead to a $150 million share repurchase program. The move is part of a broader $1.4 billion transaction it announced in June 2015. The share repurchase deal will be carried out in the near future. Wendy's said it has already returned $ 185 million to shareholders this year through share repurchases.


In the last couple of weeks, Wendy's stock proved tempting for several insiders. The most recent deal was carried out by activist billionaire investor Nelson Peltz. He bought 3,743,384 shares on the open market through affiliates of Trian Fund Management.

The stock exchanged hands at an average price of $12.79 through transactions that took place on December 2, 5 and 6. Peltz now owns 60.3 million shares, or about a 23.5% stake in the business. The move added to the stock’s already impressive rally this past month, gaining nearly 20%. The shares had already surged ahead of the purchases.

Investors must also take note of the fact that Peltz is already by far the largest holder in Wendy's. He has been active in the company for decades, with his tenure at the burger chain being longer than any of the current executives. Moreover, Peltz has served as chairman and CEO and as a director of some of its subsidiaries. This, along with the other recent transactions, prove that buyers seem broadly optimistic about the company’s future. They are generally expected to have good knowledge about the health and prospects of their business. That is why insiders’ moves deserve attention.

What experts say

Wendy's has been under the radar of several Street analysts as well. As of December 15, as many as 17 analysts were covering the stock, according to the Independent Republic. Their median one-year price target for the company is $12.50, which implies that the shares could still increase over -10%. Six agencies rate Wendy’s a “Buy,” four have given it a “Strong buy,” while 11 advocate a “Hold” rating.

On Friday’s close, Wendy's traded on NASDAQ at $13.75 per share.


I/we have no positions in any stocks mentioned and have no plans to initiate any within the next 72 hours.

I wrote this article and it expresses my own opinions. I am not receiving compensation for it and have no business relationship with any company whose stock this article mentions.