Goldman Removes Wendy's From 'Conviction Buy' List Following Q2 Earnings

Analysts at Goldman Sachs no longer feel that

should be a part of its "Conviction Buy" list following the burger chain's second quarter earnings result. In a research report on Wednesday, Goldman Sachs' Karen Holthouse acknowledged that Wendy's remains a "compelling longer-term cash flow story" but its near-term is clouded with uncertainty. According to Holthouse, there is a "lack of visibility" into the comp improvement story. Specifically, the company's plans for brand and core advertising are creating "less of a call to action" and the most recent quarter also served as an example of "limited time offers missing expectations." The analyst also added that Wendy's attempt to work with franchisees on a price versus traffic trade off solution could remain a comp headwind. On the other hand, re-franchising and re-modelling initiatives "continue to hit guided marks and there is a growing stream of property revenues along with the potential for additional cost opportunities as "a cushion against comp volatility." Despite being removed from the "Conviction Buy" list, Holthouse maintained a Buy rating but with a price target lowered to $11 from a previous $12.50.