NEW YORK (TheStreet) -- Shares of the fast food restaurant chain Wendy's Co. (WEN) are higher by 2.88% to $11.42 at the start of trading on Wednesday morning, after the company announced a new $1.4 billion share repurchase program.
"Our recent operating results, along with the shareholder-value enhancing initiatives and updated outlook announced today demonstrate continued progress with our brand transformation," company CEO Emil Brolick said in a statement announcing the repurchase.
"The growth reflected in our long-term outlook, especially our expectations for steadily increasing Adjusted EBITDA margins, demonstrates the higher quality of earnings we are generating as a result of our system optimization initiative, which remains on track for completion in 2016," Brolick continued.
As part of the plan the company will begin an $850 million share repurchase program today, with a tender offer to purchase up to $639 million of its common stock at a price between $11.05 and $12.25 per share.
The buyback will include a piece of the stake owned by Wendy's biggest shareholder Trian Fund Management, which is owned by billionaire Nelson Peltz.
Train owns approximately 24.8% of Wendy's outstanding common stock and is intending over the next few months to lower its ownership position by between 17% and 19.68% through the sale to the company.
Wendy's is the third largest burger chain in the U.S., according to Bloomberg.
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 several positive factors, 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 good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has increased to $21.74 million or 47.47% when compared to the same quarter last year. In addition, WENDY'S CO has also vastly surpassed the industry average cash flow growth rate of -11.30%.
- Compared to its closing price of one year ago, WEN's share price has jumped by 37.07%, exceeding the performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- WENDY'S CO's earnings per share declined by 41.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, WENDY'S CO increased its bottom line by earning $0.32 versus $0.12 in the prior year. This year, the market expects an improvement in earnings ($0.34 versus $0.32).
- 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. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.84 is somewhat weak and could be cause for future problems.
- WEN, with its decline in revenue, slightly underperformed the industry average of 7.3%. Since the same quarter one year prior, revenues fell by 10.9%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: WEN Ratings Report