Wendy's Leaves Bad Taste in Investors' Mouths

Arby's is expected to drive down its parent company Wendy's/Arby's.
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Arby's is spoiling the bottom line of parent company

Wendy's/Arby's

(WEN) - Get Report

-- and leaving a bad taste in the mouth of investors today.

The restaurant chain, which sells roast beef sandwiches and other items for slightly more than its burger competitors, is expected to continue to put a damper on Wendy's/Arby's sales, according to analysts.

Shares of the company fell more than 5% to $4.15. in afternoon trading.

And if things don't improve soon it could mean more restaurant closures.

As a result, UBS analyst David Palmer lowered his price target to $4.90 from $5.80. He said in a note on Tuesday that he expects Arby's May same-store sales to fall between 10% and 13%, down from a 9% decline in April.

Roth Capital Partners analyst Anton Brenner, meanwhile, said in a note to investors that although the company may benefit from cutting costs and expenses, "the sales outlook for both concepts remains clouded in our estimation, particularly for Arby's."

The two chains merged last year when Arby's purchased the Wendy's brand, making it difficult to interpret the company's earnings statement since prior year's results do not include both brands.

"Attempting to evaluate the company's progress in attaining its margin objectives is like gauging progress by looking at a chart without a scale," Brenner wrote.

Last week, rival

Burger King

was

downgraded by an analyst

who said same-store sales throughout the month have likely moderated to negative mid-single digits for late April into early May.

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