It is important to follow relationships and how the price action in one issue may or not affect others in its sector. On Thursday’s PreMarket Prep show, there was a discussion about how the recent price action in Wendy’s Co. WEN following its first-quarter report will impact its peer McDonald’s Corp (NYSE; MCD) in Thursday’s session. And what implications Wendy’s price action in 2022 may or may not have on McDonald’s moving forward.
Wendy’s Q1 Miss: After the close on Wednesday, Wendy's reported quarterly earnings of 17 cents per share, which missed the analyst consensus estimate of 18 cents by 5.56%.
This is a 15% decrease over earnings of 20 cents per share from the same period last year. The company reported quarterly sales of $488.6 million, which missed the analyst consensus estimate of $497.1 million by 1.71%. This is a 6.17% increase over sales of $460.2 million in the same period last year.
Wendy’s Price Action: When the earnings for Wendy’s were being discussed on the show, it was trading slightly in the red.
With the nasty price action from Wednesday, it was a question of whether Wednesday’s low would hold and instigate a rally. As it turns out, that low did hold, and the issue is now in the green by 90 cents at $16.97.
Comparing McDonald’s, Wendy’s In 2022: McDonald’s peaked in January at $271.15 and ended Wednesday's session at $244.43, which is a decline of $26.72 or just under 10%. Wendy’s peaked in January at $24.48 and ended Wednesday’s session at $16.07 for a decline of $8.41 or 34%.
While the January high was an all-time high for McDonald’s, Wendy’s all-time high was made in June 2021 at the height of meme mania at $29.42, making for a decline of $13.35 or 45%.
Different Perspectives: The author of this article compared the 2022 performance of both issues. The assumption made was that McDonald’s may be due for more of a decline based on Wendy’s price action. Co-host Dennis Dick did not agree.
He said: “McDonald's has pricing power galore. My kids will demand McDonald’s; they will not demand Wendy’s” He added: “I cannot believe the price of a Big Mac. They are passing the higher costs on to the consumer.”
McDonald's is being identified as a "safety trade" and holding up for now, Dick said, adding: "I would not want to own it long-term."
MCD, WEN Price Action: At least in Thursday’s session, some investors were taking some chips off the table in McDonald’s and buying the dip in Wendy’s.
McDonald's closed slightly in the red at $244.19 and Wendy's rallied 7% to $17.20, according to Benzinga Pro.
The discussion on these two issues from Thursday’s show can be found here:
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