Wendy's Needs Improved Cash Returns From New US Units To Accelerate Growth, Analyst Says

JPMorgan analyst John Ivankoe gives Wendy’s Co (NASDAQ:WEN) a Neutral rating, lowering the price forecast to $17 from $20.

Ivankoe stresses the need for improved cash returns from new U.S. units to accelerate growth, as Wendy’s U.S. units have grown by 1.4% since 2019 but declined by 2.9% since 2014.

The analyst notes that despite a dividend cut to 56 cents from $1, the stock still offers an attractive 4% dividend yield, with over $135 million payment in FY25.

Capital intensity is rising from $170 million in FY24 to $206 million in FY25, driven by increased contributions for new franchise builds in the U.S., from $41 million in FY24 to $70 million in FY25.

Ivankoe forecasts FY25-FY27 estimates based on a new growth strategy, with unit growth around 3%, driving low-single-digit system sales growth. This will result in mid-single-digit EBITDA growth and mid-to-high-single-digit EPS growth, alongside an appropriate return of capital to shareholders.

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Apart from these, the analyst highlights anticipation for the March 6 investor update at Wendy’s Dublin, Ohio, headquarters, focusing on CEO Kirk Tanner’s first year and CFO Ken Cook’s new role.

The analyst notes that 2025 will likely see faster adoption of digital menu boards and kiosks in U.S. stores to improve ordering efficiency. Additionally, the FreshAI voice-enabled drive-through is already in over 100 locations, with plans to expand to 500-600 stores in 2025, Ivankoe adds.

WEN Price Action: Wendy’s shares are trading lower by 2.29% to $15.55 at publication on Wednesday.

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