Wendy's Is Reaching An Inflection Point; SunTrust Starts At Buy

• Wendys Co WEN shares are down 16 percent in the last six months, after touching a high of $11.57 on May 20.
• SunTrust Robinson Humphrey’s Jake Bartlett initiated coverage of the company with a Buy rating and a price target of $11.
• The company is reaching an inflection point and appears poised for increased SSS and unit growth, Bartlett said.

Wendy’s is the third largest Hamburger QSR in the US. Analyst Jake Bartlett believes that the company is reaching an inflection point where its same-store sales, or SSS, are expected to outperform and new unit growth likely to reaccelerate.

The company’s reimaging efforts and increased focus on high quality and fresh food are expected to boost SSS by an estimated 100bps per year through 2020.

“We think WEN’s past and present efforts to strengthen its brand positioning will bear fruit as its reimages progress,” Bartlett stated, while adding that the “tipping point” is being achieved and the company is expected to post about 3 percent SSS for the next several years.

Bartlett expects Wendy’s unit growth to accelerate to more than 3 percent over the five years in view of the improved SSS, stronger new unit economics in view of the company’s Image Activation design and increased focus on international growth.

“We estimate 1,100 new units (~100 international) through ’20 with unit growth accelerating to 3.2%, which may prove conservative,” Bartlett wrote. The company intends to establish 1,000 new units in North America from 2014-2020.