Argus cuts Wendy’s to Hold as U.S. sales weaken, outlook lowered

Investing.com --Argus downgraded Wendy’s to Hold from Buy, citing soft U.S. sales and traffic that are weighing on results despite gains overseas.

The fast-food chain reported second-quarter revenue down 2% from a year earlier, with global sales slipping 1.8%. U.S. sales fell 3% and same-store sales dropped 3.6%, offset only partly by a 9% increase in international sales.

Argus said international momentum is not enough to make up for the U.S. declines.

Management lowered its 2025 guidance for the second quarter in a row. It now expects adjusted EPS of 82 to 89 cents, down from its prior range of 92 cents to 98 cents.

Full-year EBITDA expectations were also cut. Argus trimmed its own estimates in response, pointing to “near-term trends [that] are more problematic.”

Shares have fallen 18% in the past three months and are down nearly 50% over the past year, underperforming both the S&P 500 and peers such as McDonald’s and Yum Brands.

The stock has also been under pressure from a heavy debt load and a dividend cut. The payout was reduced more than 40% to 56 cents annually, though at current prices it still yields about 6%.

Argus said Wendy’s valuation looks inexpensive, but the company faces rising costs, a leadership transition, and stiff competition.

“We would consider returning the stock to our buy list if U.S. sales show a turnaround and international sales pick up,” the analysts at Argus said.

“We view Wendy’s as a well-run company with a long track record in its industry. However, near-term trends are more problematic”

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