With this note, we raise our full-Q1E Wendy’s U.S. same-store sales forecast by +300 basis points, to +10.0%. According to Consensus Metrix, sell-side consensus for Q1E as of this writing is at +7.3%.
Earlier today, McDonald’s reported $1.70 in adjusted Q4 EPS, lower than our $1.72 forecast and sell-side consensus (according to Consensus Metrix) of $1.77. Fourth-quarter Company-Operated Restaurant Expenses/Sales by CompanyOperated Restaurants came in at 85.2%, worse than our 82.8% estimate.
With this report, we upgrade the shares of Wendy’s (WEN) to Buy (from Neutral). The reasons for our upgrade include: (1) U.S. same-store sales trends that look better than the Street may expect (particularly for July, which may have positive implications for momentum for Q3 as a whole), (2) the possibility that the 5% or so of the Wendy’s worldwide store base that is company-owned produced higher-thananticipated restaurant-level margins in Q2 (and if so, what this may imply about the possibilities for such margins in Q3 and Q4), and (3) the recent nationwide launch of the Wendy’s Rewards loyalty program, which could help spur sales better than they otherwise would be through Q2 2021.