Fast food chains Wendy’s (NASDAQ:WEN) and Papa John’s (NASDAQ:PZZA) release Q3 reports

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Updated: 07 November 2019
  • Robust same-store sales help Wendy’s (NASDAQ:WEN) to Q3 beats.
  • Analyst Jim Cramer says “I really like them” as Wendy’s gets serious in breakfast space.
  • Papa John’s (NASDAQ:PZZA) shares trading at $57.19 after earnings miss, revenue beat.

Wall Street analyst Jim Cramer believes Wendy’s “is in good shape” after the fast-food restaurant company posted earnings and revenue beats for Q3 and outlined its commitment to competing with McDonald’s (NYSE:MCD) in the breakfast market.

Wendy’s came in with $0.19 Non-GAAP EPS for the latest three-month period, four cents higher than the consensus and $437.9m revenue — up 9.3% year-over-year and $3.45m ahead of forecasts.

The Q3 results are a timely riposte to the negative sentiment that was prevalent in September when Wendy’s opted to scale back its adjusted earnings guidance after putting a $20bn investment plan in motion to hire more employees and serve breakfasts at franchises across the US.

On Wednesday, Cramer said the decision to bring in 20,000 new workers is a testament to its commitment to competing with big players in the breakfast space.

Wendy’s now expects per-share adjusted earnings to be a little stronger than its previous guidance with anything between a drop of 1.5% and a gain of 1.5% possible for the latest quarter.

System-wide sales climbed 5.5% in Q3 and Wendy’s said sales for the full year would land somewhere between $12–$12.5bn, while adjusted EBITDA will be $425–$435m.

Cramer said he “really likes” the company’s performance at the moment, but that positivity did not translate into share gains on Wednesday as stock eased 0.66% lower. Shares were changing hands for $20.70 in early trade.

Papa John’s also reported in midweek, and it was a mixed showing as a revenue beat was offset — the firm also announced an earnings miss and news that chief financial officer, Joe Smith, will step down from his role in 2020.

The pizza restaurant franchise delivered $0.21 earnings per share, which was just a single cent below the $0.22 expectations and $403.7m revenue — a figure that was up 10.91% Y/Y and easily above the $384m forecasts.

In a statement, CEO Rob Lynch said: “We are all focused on the right things — reinforcing the quality of our food, improving our unit economics, and promoting a company culture that sets us up to win for years to come.”

Smith’s departure is a blow for the company, but it has already started the search for a replacement and also announced the arrival of Max Wetzel who will now serve as chief commercial and marketing officer.

Lynch said the realignment of senior management and addition of “proven talent” is part of its efforts to implement a “more focused plan” and follow through on “strategic properties.”

Papa John’s will also rein in its expansion of new stores. It now expects 85–115 units to open globally in Q4, down slightly from the 100–150 guidance offered previously.

PZZA shares were valued at $61.14 on Thursday.