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Wendy's Stock Off; Same-Store Sales Lag Estimates, Buyback Lifted

Restaurant chain Wendy's raised its share-buyback program by $80 million to $300 million.
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Shares of Wendy's  (WEN) - Get Wendy's Company Report dropped Wednesday after the fast-food chain reported third-quarter earnings that beat Wall Street forecasts but missed estimates on same-restaurant sales.

Shares of the Dublin, Ohio, company dropped 7.12% to close at $21.40.

For the quarter ended Oct. 3, net income rose 3.5% to $41.1 million, or 18 cents a share, from $39.7 million, or 17 cents a share, in the year-ago quarter.

The latest adjusted earnings were flat with the year-earlier period at 19 cents a share.

Revenue rose 4% to $470.3 million from $452.2 million in the year-earlier quarter.

Analysts surveyed by FactSet estimated earnings of 18 cents a share on revenue of $470.47 million.

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"We continued to grow our breakfast business, digital sales accelerated, and we meaningfully expanded our global footprint in the third quarter," President and Chief Executive Todd Penegor said in a statement.

Same-store-sales growth was 3.3%, below the FactSet consensus for 4.9% growth. U.S. same-store sales growth was 2.1%, and international same-restaurant sales growth was 14.7%.

Wendy's also increased its share repurchase program by $80 million to $300 million. The company is accelerating part of the program, planning to buy back $125 million of shares in the fourth quarter.

In the third quarter, the company repurchased 1.9 million shares for $43.8 million.

Analysts at Oppenheimer on Tuesday reiterated an outperform rating for Wendy's with a $29 price target.

"The company has discovered powerful unlocks to unit growth, which appear underestimated by consensus and underappreciated by the stock's 23% valuation discount to peers," analyst Brian Bittner said.