Wendy's Sees Q4, 2014 Earnings Above View; Board Approves $275 Mln Share Buyback

(RTTNews) - Fast-food chain Wendy's Co. (WEN) reported preliminary unaudited results for the fourth quarter ended December 29, 2013. The company forecast adjusted earnings per share for the fourth quarter above analysts' estimates, while revenues are projected to miss their expectations.

Looking ahead, the company forecast fiscal 2014 earnings above Street expectations and also reaffirmed its long-term outlook. In addition, the company board of directors authorized a $275 million share repurchase program.

Dublin, Ohio-based Wendy's said it expects 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. This compares to net income of $26.4 million, or $0.07 per share in the same period last year.

The company projects adjusted net income for the quarter of $0.10 to $0.11 per share, compared to $0.09 per share in the year-ago period. On average, nineteen analysts polled by Thomson Reuters expect the company to report earnings of $0.06 per share for the fourth quarter. Analysts' estimates typically exclude special items.

The world's third-largest quick-service hamburger company said it is estimating 2013 net income, adjusted earnings per share, and earnings per share as ranges, as it has not yet completed its tax closing procedures for 2013.

The company projects consolidated revenue for the fourth quarter to decline 6 percent to $592.4 million from $629.9 million in the same period last year, 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.

Analysts had a consensus revenue estimate for the quarter of $611.32 million.

For the fourth quarter, North America company-operated restaurants reported same-restaurant sales increase of 3.1 percent, compared to a decrease of 0.2 percent in the prior-year period. Franchise same-restaurant sales in North America increased 2.8 percent, compared to a decline of 0.6 percent last year.

The company said that the increase in fourth-quarter same-restaurant sales was primarily due to the highly successful Pretzel Pub Chicken sandwich and Bacon Portabella Melt on Brioche promotions.

For fiscal 2013, Wendy's forecast net income of $37.6 million to $41.1 million, or $0.09 to $0.10 per share. This compares to net income of $7.1 million, or $0.02 per share in the prior year.

The company forecasts adjusted earnings for the year of $0.29 to $0.30 per share, compared to $0.17 in the previous year. However, consolidated revenues for the year are expected to decline to $2.487 billion from $2.505 billion last year.

Analysts expect the company to earn $0.25 per share for the year on revenues of $2.50 billion.

The company plans to release its audited financial results for the fourth quarter fiscal 2013 on Thursday, February 27, 2014.

For fiscal 2014, Wendy's forecasts adjusted EBITDA of about $390 million to $400 million, representing an increase of 6 percent to 9 percent from the prior year. The company also forecasts adjusted earnings of about $0.34 to $0.36 per share for the year. Street expects the company to report earnings of $0.29 per share for the year.

The company projects company-operated same-restaurant sales of 2.5 to 3.5 percent and company-operated restaurant margin to increase 140 to 160 basis points.

In addition, the company 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 company also projects company-operated same-restaurant sales growth of at least 3 percent.

Wendy's board of directors has authorized a new share repurchase program for up to $275 million of the company's common stock in 2014, or about 8 percent of the company's market capitalization as of January 10, 2014.

The company said it intends to repurchase shares with cash on its balance sheet of about $580 million, as at December 29, 2013. This includes a cash distribution of $40 million received in the fourth quarter of 2013 from Arby's Restaurant Group, Inc., as a result of the company's 18.5 percent ownership interest in Arby's.

As part of the 2014 share repurchase program, Wendy's expects to commence a "Dutch Auction" tender offer on January 14, 2014, to repurchase up to $275 million of its common stock at a price range between $8.50 and $9.25 per share.

Wendy's said it plans to further optimize its restaurant ownership by selling certain company-operated restaurants to franchisees. The company is targeting the completion of the sale of about 415 restaurants in the second quarter of 2014 and anticipates total proceeds of about $235 million, including $138 million in 2013.

As part of its System Optimization initiative, Wendy's has sold, or has signed purchase agreements or letters of intent to sell, a total of 384 restaurants as of the end of 2013.

Further, Wendy's noted that its Image Activation program that started in 2011 has accelerated over the past two years, producing increased traffic and higher sales.

The company is offering a 2014 incentive program to qualified franchisees commencing Image Activation reimages during the year. The estimated 2014 impact of this program is about $8 million and includes cash incentives, royalty reductions, and other costs for franchisee planning services and construction support. This compares to 2013 Image Activation cash incentive expense of $9.2 million.

WEN closed Friday's trading at $8.44. In Monday's pre-market, the stock is up $0.49 or 5.87 percent to $8.93.