NEW YORK (AP) — Shares of Wendy's climbed on Wednesday as Wedbush Equity Research boosted its rating in anticipation of growing sales and profits.
THE SPARK: Analyst Nick Setyan raised his rating for Dublin, Ohio, company to "Outperform" from "Neutral" and increased his price target by 50 cents to $5.50. He cited the company's recently released sales second-quarter sales predictions and future profit potential.
THE BIG PICTURE: The Wendy's Co. is reinventing itself, trying to shake the perception that its stores and menu had become outdated. It dethroned Burger King as the country's second biggest hamburger chain, according to a report earlier this year from the food industry research firm Technomic Inc. The chain brought in new leadership and overhauled its menu. Still, the company struggled last quarter with higher costs for beef and slower-than-expected sales.
THE ANALYSIS: Setyan said the company's second-quarter same-store sales guidance exceeded the expectations most Wall Street expectations. He predicted that Wendy's will continue to post same-store sales growth and boosted his third-quarter growth prediction to an increase of 3 percent from his previous prediction of 2 percent.
"In addition to improved year-over-year traction of ongoing limited time offers due to an easing competitive environment, we estimate that stepped up 'Late Night' promos and increased focus on Hispanic advertising could contribute more than 100 basic points of incremental same-store sales growth in the near-term," Setyan wrote in a note to investors.
The analyst added that he also expects the company's profitability to get a boost as beef costs decline.
THE SHARES: Up 14 cents, or 3.1 percent, to $4.72 in morning trading. Over the past 52 weeks, the company's shares have traded between $4.29 and $5.58. Since the beginning of this year, the shares have lost about 15 percent of their value.