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The Wendy's Co Class A - Stock Quote WEN

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Morningstar's The Wendy's Co Class A Stock Analysis

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Wendy's Shares Jump Sharply on Activist Investor Commentary; We Maintain Our $22 Fair Value Estimate

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

Narrow-moat Wendy's shares have jumped nearly 10% premarket as activist investor Trian Fund Management, Nelson Peltz (Wendy's current nonexecutive chairman), and business partner Peter May together disclosed a 19.4% ownership stake in the company and an interest in pursuing an acquisition or a merger with the domestic hamburger chain. Peltz's pedigree is impressive, with a history of engagement across a wide swath of consumer companies—Cadbury, Wendy's, PepsiCo, Procter & Gamble, and Mondelez—often involving reductions in operational overhead and the spinoff of noncore business lines, as we saw with Wendy's own separations with Arby's (now an Inspire Brands subsidiary) and Tim Hortons (narrow-moat Restaurant Brands) in the 2000's. Given the uncertainty, we expect to maintain our $22 fair value estimate for the name, with shares continuing to trade at about a 20% discount to our intrinsic valuation despite the premarket pop.

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The Wendy's Co Class A's Company Profile

Business Description

The Wendy’s Company is the second-largest burger quick-service restaurant, or QSR, chain in the United States by systemwide sales, with $11.1 billion in 2021, narrowly edging Burger King ($10.3 billion) and clocking in well behind wide-moat McDonald’s ($45.7 billion). After divestitures of Tim Horton’s (2006) and Arby’s (2011), the firm manages just the burger banner, generating sales across a footprint that spans almost 7,000 total units in 30 countries. Wendy’s generates revenue from the sale of hamburgers, chicken sandwiches, salads, and fries throughout its company-owned footprint, through franchise royalty and marketing fund payments remitted by its franchisees, which account for 94% of stores, and through franchise flipping and advisory fees.

One Dave Thomas Boulevard
Dublin, OH, 43017
T +1 614 764-3100
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Mar 31, 2022
Fiscal Year End Jan 31, 2023
Stock Type Cyclical
Employees 14,500

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