Better Than Feared, Still Far From Good
This week Wendy’s published its latest earnings, and there was both good and bad news. While the company managed to beat analysts’ expectations, which admittedly were set very low, management once again had to report declining earnings. EPS fell from $0.16 in Q4 to $0.12 in Q1. Revenue came in roughly flat, slipping from $543M in Q4 to $540.6M now. Yes, they beat expectations on revenue too, but the bar wasn’t exactly high. Right now, hardly anyone seems to be betting on a real turnaround.
What really hurt was the continued weakness in the crucial U.S. market. While McDonald’s and Burger King reported solid single-digit growth, Wendy’s same-store sales dropped 7.8%. That’s slightly better than the double-digit decline from the previous quarter, but still ugly. Yahoo Finance analyst Brian Sozzi summed it up pretty bluntly: “Something is very wrong with Wendy’s.”
Interim CEO Ken Cook still doesn’t seem to be making much of an impact. He’s been running the company for almost a year now, and Wendy’s still appears unable to find a permanent external replacement. The numbers keep moving sideways with only minor improvements here and there. At least the international business is holding up reasonably well, posting 6% growth.
So overall, it doesn’t sound particularly encouraging, does it?
Still, there is one positive: the chart actually looks somewhat promising. Maybe the market is starting to see something ahead that I simply don’t see yet. What matters for now is that the stock climbed above $7.15 and managed to close the week there. A small bullish signal, assuming it can hold that level.
What do you guys think? Is this the first glimpse of a genuine turnaround, or just speculative hopium? Personally, I’m not convinced yet and prefer staying on the sidelines for now.
