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Restaurant Stocks: Earnings to Watch

Wendy's Arby's Group

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Wendy's Arby's (WEN) reported quarterly earnings Nov. 12.

Revenue: $861.2 million, compared with year-earlier sales of $903.2 million.

Net Loss: $900,000, compared with year-earlier earnings of $14.7 million.

Net Loss Per Share: 0 cents, compared with year-earlier earnings per share of 3 cents.

Analysis: Deutsche Bank's Jason West had a buy rating on Wendy's Arby's ahead of its report. Analysts from UBS reiterated a neutral rating on Wendy's Arby's shares several days ahead of its earnings announcement, raising their price target on the stock by 50 cents to $5.

Wendy's booked a surprise loss and adjusted its forecast , saying 2010 results would likely come in toward the low end of its previously announced guidance.

>>Wendy's Disappoints With Surprise Loss

At Wendy's restaurants, comps fell 1.7% and declined 5.9% at Arby's restaurants.

CEO Roland Smith said "third-quarter results are simply not satisfactory to us," and that the company continued to work on its long-term growth potential, expanding its breakfast platform at Wendy's, remodeling stores of both brands, and expanding internationally.

He added that the Arby's brand turnaround remained a key focus and was showing some progress with comps up 5.5% in October. Wendy's and Arby's merged in a $2 billion deal in September 2008.

The company now expects fiscal 2010 adjusted earnings before interest, taxes, depreciation and amortization to be at the lower end of its previously announced range, which was for a 3% to 5% decline compared with fiscal 2009 EBITDA of $411.6 million. Analysts' consensus call was for EBITDA of $400.2 million for fiscal 2010.

Same-store sales at Wendy's North America company-operated restaurants are expected to decline 1% in fiscal 2010. Arby's should post negative same-store sales but show a year-over-year improvement.

Analysts from UBS reiterated a neutral rating on Wendy's Arby's shares several days ahead of its earnings announcement, raising their price target on the stock by 50 cents to $5.
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