4 Reasons To Like Wendy's, According To BTIG

Wendys Co WEN boasts a compelling investment profile as multiple catalysts ahead will spur consistent sales growth, margin improvements and attractive capital returns, according to BTIG.

The Analyst

BTIG's Peter Saleh initiated coverage of Wendys with a Buy rating and $20 price target.

The Thesis

Wendys is the third-largest hamburger restaurant chain and investors should be buyers of the stock for four reasons.

1. The company is ahead of the competition in remodeling its stores with around 46 percent reimages completed as opposed to competitors who are only starting their remodels. The improved store appearance is already contributing around 60 basis points annually to same-store sales.
2. Wendys' new ordering kiosks in stores is generating an economic benefit of $3,000 per unit through labor savings, faster completion of customer orders and higher average spend per consumer.
3. The company's expansion into delivery isn't showing signs of hurting margins as the average check size is 1.5 to two times higher than traditional orders to account for delivery costs. By comparison, fast food peers are charging the same price for ordering as they do in-store which results in materially lower profitability.
4. Over the coming years, management's initiatives to slash costs through automation, enhanced scheduling and supply changes could lift margins by 60 basis points annually.

Price Action

Shares of Wendys were trading marginally higher Tuesday at $17.45.

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