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TheStreet Open House

Why Wendy's (WEN) Stock Is Down In Pre-Market Trading On Tuesday

NEW YORK (TheStreet) -- Shares of The Wendy's Co. (WEN) are down -1.90% to $8.28 in pre-market trading today following a ratings downgrade to "hold" from "buy" at Argus Research.

The firm said it lowered its rating on the fast food chain based on the company's uncertain outlook, and cost concerns regarding Wendy's remodeling plans.

Argus also said Wendy's franchising could continue to weigh on sales in upcoming quarters.

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Separately, TheStreet Ratings team rates WENDY'S CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate WENDY'S CO (WEN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share, compelling growth in net income, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Powered by its strong earnings growth of 1100.00% and other important driving factors, this stock has surged by 49.73% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • WENDY'S CO reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WENDY'S CO increased its bottom line by earning $0.12 versus $0.02 in the prior year. This year, the market expects an improvement in earnings ($0.35 versus $0.12).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 2070.8% when compared to the same quarter one year prior, rising from $2.13 million to $46.30 million.
  • The debt-to-equity ratio is somewhat low, currently at 0.85, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.45, which illustrates the ability to avoid short-term cash problems.
  • You can view the full analysis from the report here: WEN Ratings Report
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