Why Wendy's Shares Got Gobbled Up
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Wendy's climbed 10% today after the fast-food restaurant operator posted strong quarterly results and announced a plan to sell about 425 restaurants by mid-2014.
So what: The stock has soared over the past year on optimism over its rebranding initiatives, and today's second-quarter results -- EPS of $0.03 on a 260-basis-point operating margin increase -- only reinforce those good vibes. Additionally, management's decision to sell 425 company-owned restaurants to franchisees should give Wendy's a much more stable revenue stream from a higher percentage of royalty and rent income.
Now what: In connection with the sales plan, Wendy's approved a 25% bump in its quarterly dividend and also authorized a share repurchase program for up to $100 million. "The dividend increase and share repurchases are important elements of our financial management strategy," CFO Steve Hare said. "We are committed to continuing to deploy capital to drive the organic growth of our restaurant business, in addition to returning cash to shareholders." With the stock now up a whopping 80% over the past year and trading at a forward P/E of 30, however, much of that growth might already be baked into the valuation.
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The article Why Wendy's Shares Got Gobbled Up originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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