Investors may want to revisit their appetite to own fast-food pizza stocks and industry heavyweight McDonald's (MCD) during the pandemic and consider taking a nibble at spicy nugget purveyor Wendy's (WEN).
Because at first blush, the Dave Thomas-founded restaurant chain just had an earnings day performance that should make one question why the stock has been stuck in neutral this past year. Wendy's U.S. same-store sales in the first quarter surged 13.5%, powered by diners heading back out after getting their COVID-19 vaccine and trying the chain's new breakfast menu. Digital ordering and a push into more premium chicken sandwiches also lit a fire under first quarter sales.
Wendy's same-store sales internationally rose 7.9%.
Wendy's almost beat out McDonald's U.S.'s 13.6% same-store sales increase in the quarter, the latter of which could be seen as a letdown considering it launched three new chicken sandwiches. Same-store sales for Burger King U.S. rose 6.6% in the quarter.
For good measure, Domino's Pizza U.S. business and Pizza Hut U.S. business notched 13.4% and 16%, respectively, same-store sales gains in the first quarter. But again, that is to be expected as the pizza players have been hot throughout the pandemic shareable food offering. Wendy's performance, many would argue, comes as a bit of a surprise to Wall Street.
"We think this clean beat and raise should help shares play catch-up to quick service peers (Wendy's shares are +4% year to date vs. S&P +10.5%)," said Wells Fargo restaurant analyst Jon Tower.
Here's how Wendy's performed in the first quarter compared to Wall Street estimates:
Net Sales: $460.2 million vs. $444.3 million
Global Same-Store Sales: +13% vs. +9.6%
Adjusted EBITDA: $121 million vs. $105.4 million
Adjusted EPS: $0.20 vs. $0.14
Wendy's shares had been up more than 3% Wednesday on the results, but pulled back amid a broader market sell-off that has entered day three.
The company lifted its dividend by 11% and increased its share buyback plan by $50 million. For the full year, Wendy's sees adjusted earnings of 72 cents to 74 cents a share. The Street had modeled for earnings of 69 cents a share.
Wendy's CEO Todd Penegor is banking on the breakfast business to be a major tailwind to the business this year as the economy roars back to life.
"We're really excited about where this business [breakfast] can go in the future and as part of our earnings, — we do believe it can be a 10% mix of our business by the end of 2022," Penegor recently told Yahoo Finance Presents. "We've been talking about how it is [breakfast] a billion plus incremental sales layer to our business — so we're a $12 billion system today so at a 10% mix, it would be $1.2 billion."
The end result: perhaps another good earnings day on tap three months from now for Wendy's
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