UBS Reiterates Sell At Wendy's

In a report published Monday, UBS analysts maintained a Sell rating on

, while raising the price target from $7.50 to $9.00. In the report UBS noted, "While WEN receives obvious one-time and NT benefits from the conversion to a more heavily franchised model, the algorithm isn't all that compelling post the refranchising, in our view. We believe technical pressures on shares will be to the upside during the repurchase period over the next 12-15 months, and a longer buyback period is likely more supportive than accel. action (ie. Dutch Tender)." The price target has been raised to reflect an upward revision in the estimates, the company's transition to a more heavily franchised model and accelerating FCF growth. Despite this, there is unlikely to be expansion in the company's multiples, in view of limited net unit growth and low same-store sales compared to many peers, the analysts explained. "…we expect slightly better than flattish EBITDA growth, just +MSD EPS, with some leverage from share repo, and FCF growing meaningfully through 2017, but then slowing. SSS results lagging peers, and longer-term setup doesn't look much better WEN sss results have lagged most non-McDonald's QSR peers in recent quarters, and as MCD stops donating share and becomes a greater competitive threat as sales rebound, headwinds could be significant," the analysts added. Image Activation and a digital platform could result in comp growth going ahead, these initiatives are necessary since the company operates in a highly competitive segment, the analysts said, while adding that the company's initiatives "don't appear particularly unique or differentiated."