Analysts Are Updating Their The Wendy's Company (NASDAQ:WEN) Estimates After Its Second-Quarter Results

Last week saw the newest second-quarter earnings release from The Wendy's Company (NASDAQ:WEN), an important milestone in the company's journey to build a stronger business. The result was positive overall - although revenues of US$562m were in line with what the analysts predicted, Wendy's surprised by delivering a statutory profit of US$0.28 per share, modestly greater than expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Wendy's after the latest results.

View our latest analysis for Wendy's

Taking into account the latest results, Wendy's' 22 analysts currently expect revenues in 2023 to be US$2.20b, approximately in line with the last 12 months. Statutory earnings per share are predicted to accumulate 6.1% to US$0.97. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.21b and earnings per share (EPS) of US$0.95 in 2023. So the consensus seems to have become somewhat more optimistic on Wendy's' earnings potential following these results.

The consensus price target was unchanged at US$24.80, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Wendy's, with the most bullish analyst valuing it at US$31.00 and the most bearish at US$22.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's pretty clear that there is an expectation that Wendy's' revenue growth will slow down substantially, with revenues to the end of 2023 expected to display 3.9% growth on an annualised basis. This is compared to a historical growth rate of 7.3% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 11% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Wendy's.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Wendy's following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting that it's tracking in line with expectations. Although our data does suggest that Wendy's' revenue is expected to perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Wendy's. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for Wendy's going out to 2025, and you can see them free on our platform here..

Plus, you should also learn about the 2 warning signs we've spotted with Wendy's (including 1 which is concerning) .

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.