The Wendy's Company (NASDAQ:WEN) Just Reported Earnings, And Analysts Cut Their Target Price

The Wendy's Company (NASDAQ:WEN) came out with its quarterly results last week, and we wanted to see how the business is performing and what industry forecasters think of the company following this report. It was a credible result overall, with revenues of US$571m and statutory earnings per share of US$0.27 both in line with analyst estimates, showing that Wendy's is executing in line with expectations. 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. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Wendy's

Following last week's earnings report, Wendy's' 23 analysts are forecasting 2024 revenues to be US$2.22b, approximately in line with the last 12 months. Statutory earnings per share are forecast to decrease 4.9% to US$0.94 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.24b and earnings per share (EPS) of US$0.95 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The consensus price target fell 5.3% to US$19.17, suggesting that the analysts might have been a bit enthusiastic in their previous valuation - or they were expecting the company to provide stronger guidance in the quarterly results. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Wendy's analyst has a price target of US$26.00 per share, while the most pessimistic values it at US$16.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Wendy's' revenue growth is expected to slow, with the forecast 2.5% annualised growth rate until the end of 2024 being well below the historical 6.7% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 9.7% annually. Factoring in the forecast slowdown in growth, it seems obvious that Wendy's is also expected to grow slower than other industry participants.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target fell measurably, with the analysts seemingly not reassured by the latest results, leading to a lower estimate of Wendy's' future valuation.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Wendy's going out to 2026, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for Wendy's (1 makes us a bit uncomfortable!) that you need to be mindful of.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com