Wendy's Q4 Profit Up 25%, Beats View; Reaffirms Outlook

(RTTNews) - Fast food chain Wendy's Co. (WEN) on Thursday reported a 25 percent increase in profit for the fourth quarter from last year, as lower expenses helped offset a decline in revenues. Adjusted earnings per share beat analysts' expectations, while revenues missed their estimates.

Looking ahead, Wendy's affirmed its earnings outlook for fiscal 2014 and also reiterated its long-term guidance. The company also said it expects to complete the sale of about 415 company-operated restaurants to franchisees by the end of the first quarter.

For the fourth quarter, net income attributable to the company was $33.07 million or $0.08 per share, up from $26.39 million or $0.07 per share in the previous-year quarter.

In mid-January, Wendy's had forecast net income for the fourth quarter in a range of $25.2 million to $28.7 million, or $0.06 to $0.07 per share.

The company noted that the actual results exceeded its preliminary range due to the recording of an adjustment to facilities action charges, net related to its system optimization initiative. The adjustment had the net impact of reducing expense from facilities action charges, which the company excludes from adjusted EBITDA and adjusted earnings per share.

The latest quarter's results include, among other items, impairment of goodwill of $0.02 per share and impairment of long-lived assets of $0.02 per share.

Excluding these, adjusted earnings for the latest quarter were $0.11 per share, compared to $0.09 per share in the year-ago period. On average, 17 analysts polled by Thomson Reuters expected the company to report earnings of $0.09 per share for the quarter. Analysts' estimates typically exclude special items.

However, revenues for the quarter declined 6 percent to $592.41 million from $629.88 million in the same period last year. Analysts had a consensus revenue estimate of $600.64 million for the quarter.

The decline in revenues was primarily due to a reduction in the number of company-operated restaurants due to the company's System Optimization initiative. This was partly offset by the same-restaurant sales growth, as well as increases in franchise royalties, technical assistance fees and rental income.

Total expenses for the quarter declined 6 percent to $563.53 million from $597.62 million in the prior-year period.

For fiscal 2013, net income attributable to Wendy's surged to $45.49 million or $0.11 per share from $7.08 million or $0.02 per share in the prior year. Adjusted earnings for the year were $0.30 per share , compared to $0.17 per share in the previous year.

However, revenues for the year declined less than 1 percent to $2.49 billion from $2.51 billion last year.

Street expected the company to earn $0.28 per share for the year on revenues of $2.49 billion.

Looking ahead to fiscal 2014, Wendy's affirmed its outlook for adjusted earnings per share of $0.34 to $0.36. Analysts expect the company to report earnings of $0.33 per share for the year.

The outlook assumes average same-restaurant sales growth of 2.5 percent to 3.5 percent at company-operated restaurants and company-operated restaurant margin improvement of 140 to 160 basis points.

Wendy's also reaffirmed its 2014 outlook for adjusted EBITDA of $390 million to $400 million, despite the adverse impact from winter storms in the first quarter.

In addition, Wendy's reaffirmed its previous long-term outlook of high-single-digit to low-double-digit adjusted EBITDA growth, as well as mid-teens adjusted earnings per share growth. The outlook assumes annual same-restaurant sales growth of at least 3 percent beginning in 2015.

Wendy's previously said it plans to further optimize its restaurant ownership by selling certain company-operated restaurants to franchisees.

The company expects to complete the sale of about 415 restaurants by the end of the first quarter and anticipates total proceeds of about $235 million, including $138 million received in 2013.

Wendy's completed or initiated more than 200 Image Activation reimages of Company-operated and franchise-operated restaurants in 2013 and plans to nearly double the pace in 2014, with the reimaging of 200 company-operated restaurants and 150 to 200 franchise-operated restaurants.

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

In Thursday's regular session, WEN is trading at $10.11, down $0.08 or 0.78 percent on a volume of 532,668 shares.