Wendy's (WEN) to Announce Q2 Earnings: What's in the Cards?

The Wendy's Company WEN is scheduled to report second-quarter 2021 results on Aug 11, 2021, before the opening bell. In the last reported quarter, the company delivered an earnings surprise of 42.9%.

How are Estimates Placed?

The Zacks Consensus Estimate for second-quarter earnings is pegged at 18 cents per share, indicating growth of 50% from 12 cents registered in the year-ago quarter.

The consensus mark for revenues is pegged at $460.3 million, suggesting an increase of 14.4% from the year-ago quarter’s figure.

The Wendys Company Price and EPS Surprise

The Wendys Company price-eps-surprise | The Wendys Company Quote

Let's take a look at how things have shaped up in the quarter.

Factors at Play

Wendy’s second-quarter 2021 performance is likely to have reflected solid contributions from breakfast business. Ever since its launch on Mar 2, 2020 across the United States, the model has contributed 6.2%, 6.4% and 6.3% to U.S. systemwide same-restaurant sales during fiscal second, third and fourth quarter of 2020, respectively. In first-quarter 2021, breakfast contributed nearly 7% to sales. The company expects the momentum to continue in the second quarter on the back of its marketing efforts, high-quality offerings, repeat ordering as well as high customer satisfaction levels. Also, it remains bullish on this business model with plans to boost breakfast daypart sales by 30% in 2021.

Meanwhile, focus on menu innovation, technological upgrades, marketing and promotional activities, international expansion and re-imaging of units is likely to have boosted the company’s performance in the second quarter. This along with leniency in pandemic-related restrictions (in international markets) is likely to have benefitted the company in the to-be reported quarter. Furthermore, benefits from its transition to a franchised business model are likely.

The Zacks Consensus Estimate for second-quarter Franchise revenues is pegged at $129 million, indicating 25.2% growth year over year. The consensus estimate for Advertising funds revenues is pegged at $93 million, indicating growth of 19.2% year over year.

However, the coronavirus pandemic is expected to materially affect the company's operating and financial results during the second quarter. The company stated that its U.S. same-restaurant sales in the quarter will be negatively impacted by a shift related to the 53rd week that persisted in 2020. Increase in costs related to labor, construction and commodity are likely to have affected margins in the to-be-reported quarter.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for Wendy’s this time around. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to beat estimates. But that's not the case here.

Earnings ESP: Wendy’s has an Earnings ESP of -4.10%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

BJ's Restaurants, Inc. BJRI reported second-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The metrics increased year over year. The company’s adjusted earnings per share (EPS) of 26 cents beat the Zacks Consensus Estimate of 16 cents. In the prior-year quarter, the company had reported adjusted loss of 99 cents per share. Quarterly revenues of $290.3 million surpassed the consensus estimate of $285 million. The top line also rallied 126.7% year over year. The upside can be primarily attributed to the lifting of capacity and social-distancing restrictions, thereby enhancing dining room capacity.

McDonald's Corporation MCD reported second-quarter 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The metrics increased year over year. The company reported adjusted EPS of $2.37, which surpassed the Zacks Consensus Estimate of $2.12. The bottom line rose 259.1% year over year. Quarterly revenues of $5,887.9 million beat the Zacks Consensus Estimate of $5,629 million. Moreover, the figure rose 56.5% year over year. The top line benefited from increase in global comparable sales.

Starbucks Corporation SBUX reported solid third-quarter fiscal 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The metrics increased year over year. The company reported adjusted EPS of $1.01, which beat the Zacks Consensus Estimate of 77 cents. In the prior-year quarter, the company had reported adjusted loss per share of 46 cents. Meanwhile, quarterly revenues of $7,496.5 million missed the Zacks Consensus Estimate of $7,243 million. Moreover, the top line increased 77.6% from the year-ago quarter’s levels. The uptick was driven by growth in comparable store sales.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.