Walking Away From a Wendy's Love Affair
Admittedly, the company's latest quarterly results, reported last month, were good. While revenue ($630 million) was slightly below consensus ($637.8 million), earnings per share came in at double the 4 cents consensus estimate. Company guidance for 2013 is calling for eps in the 18 cents to 20 cents range, putting the forward price earnings ratio in the mid to high 20's. That's not stellar, but a huge improvement, if realized.
Whether Wendy's is finally making real progress or not remains to be seen. In the restaurant sector in general, I'm worried about the specter of rising commodity costs and potential inability to pass those on to the consumer. Wendy's CEO Emil Brolick, however, is not worried about costs. Following Wendy's latest quarterly release, Brolick suggested that the company expects cost to rise between 90 and 120 bps, which is already factored into the company's outlook.
Could I have pulled the trigger too soon on Wendy's? It would not be the first time.
Time will tell.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.