Yahoo Finance Wendy's (NASDAQ:WEN) Misses Q2 Revenue Estimates
Fast-food chain Wendy’s (NASDAQ:WEN) fell short of analysts' expectations in Q2 CY2024, with revenue up 1.6% year on year to $570.7 million. It made a non-GAAP profit of $0.27 per share, down from its profit of $0.28 per share in the same quarter last year.
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Wendy's (WEN) Q2 CY2024 Highlights:
Revenue: $570.7 million vs analyst estimates of $576.8 million (1% miss)
EPS (non-GAAP): $0.27 vs analyst expectations of $0.28 (2.3% miss)
EPS (non-GAAP) Guidance for the full year is $1.00 at the midpoint, roughly in line with what analysts were expecting
Gross Margin (GAAP): 35.3%, down from 36.5% in the same quarter last year
Free Cash Flow of $111 million, up 34.3% from the previous quarter
Same-Store Sales were flat year on year (5.1% in the same quarter last year)
Market Capitalization: $3.47 billion
"Our restaurants across the globe continued to deliver same-restaurant sales growth, holding steady with the QSR burger category in the second quarter," President and Chief Executive Officer Kirk Tanner said.
Founded by Dave Thomas in 1969, Wendy’s (NASDAQ:WEN) is a renowned fast-food chain known for its fresh, never-frozen beef burgers, flavorful menu options, and commitment to quality.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
Wendy's is larger than most restaurant chains and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 6% over the last five years was sluggish, but to its credit, it opened new restaurants and grew sales at existing, established dining locations.
This quarter, Wendy's revenue grew 1.6% year on year to $570.7 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 4.1% over the next 12 months, an acceleration from this quarter.
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Same-Store Sales
A company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.
Wendy's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 4% year on year. With positive same-store sales growth amid an increasing number of restaurants, Wendy's is reaching more diners and growing sales.
In the latest quarter, Wendy's year on year same-store sales were flat. By the company's standards, this growth was a meaningful deceleration from the 5.1% year-on-year increase it posted 12 months ago. We'll be watching Wendy's closely to see if it can reaccelerate growth.
Key Takeaways from Wendy's Q2 Results
We were impressed by how significantly Wendy's blew past analysts' gross margin expectations this quarter. We were also glad its full-year earnings guidance exceeded Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock traded up 1.4% to $17.18 immediately after reporting.
So should you invest in Wendy's right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
