Wendy's Q1 Results Top View

(RTTNews) - Fast food chain Wendy's Co. (WEN) Thursday reported a significant increase in the first-quarter profit, even as revenues declined from the prior year. Both earnings and revenues topped Wall Street estimates.

Net income for the quarter soared to $46.30 million from $2.13 million in the prior year. Earnings per share climbed to $0.12 from $0.01.

The latest results benefited from $8.0 million year-over-year reduction in interest expense as a result of the company's 2013 debt restructuring.

The results also reflected a gain of $12.1 million, which includes an $8.6 million gain on the sale of restaurants and a gain on the sale of surplus properties, as well as a $44.0 million net gain from the company's system optimization initiative. Adjusted earnings per share were $0.07, while it totaled $0.03 last year. On average, 12 analysts polled by Thomson Reuters expected earnings of $0.05 per share. Analysts' estimates typically exclude special items.

Total revenues fell to $523.2 million from $603.68 million in the prior year, due to lost revenue following the disposition of 418 company-operated restaurants as part of the system optimization initiative. Analysts expected revenues of $498.19 million.

Company-operated same-restaurant sales increased 1.3 percent, on top of a 1.0 percent growth last year, as a result of successful product promotions and increased customer traffic at Image Activation restaurants.

Costs and expenses declined to $434.18 million from $581.22 million in the prior year.

President and Chief Executive Officer Emil Brolick said, ''Our strong first-quarter results reflect the implementation of our Recipe to Win and the elements of our Growth Pyramid, including North America Same-Restaurant Sales Growth, Image Activation and Restaurant Ownership Optimization." Looking ahead, for 2014, the company still expects adjusted earnings per share of $0.34 to $0.36. Analysts look for earnings of $0.35 per share.

Wendy's expects 15 new company-operated Image Activation restaurants and 45 new franchise-operated Image Activation restaurants in 2014.

Average same-restaurant sales growth is estimated in the range of 2.5 to 3.5 percent at company-operated restaurants.

Wendy's now expects company-operated restaurant margin in a range of 16.3 to 16.8 percent, compared to its previous guidance of 16.8 to 17.0 percent. This is due to the revised outlook for an increase in year-over-year commodity costs, with higher-than-expected beef costs, primarily in the second and third quarters.

Further, the firm reaffirmed its previous long-term outlook of mid-teens adjusted earnings per share growth.

WEN ended the trade, down 0.6 percent at $8.33 on Wednesday, and gained 2.3 percent in pre-market trading.