Why Wendys Co (NASDAQ: WEN) stock is under pressure

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Wendys Co (NASDAQ: WEN) stock fell 10.21% on 10th September, 2019 (Source: Google finance) after the company projected a drop in full-year 2019 adjusted earnings. Wendy’s also said it is no longer sticking to its 2020 goals, as it will have to update them to include the expected impact of the breakfast plan. Wendy’s plans to give more financial guidance at an Oct. 11 investor meeting.

Meanwhile, WEN plans to launch its breakfast menu, currently available in more than 300 restaurants, across the U.S. system in 2020. The menu features signature items that takes the best of Wendy’s, from Applewood smoked bacon to the Frosty, and creatively delivers them to fans for breakfast. Signature items include the Breakfast Baconator, Frosty-ccino, and Honey Butter Chicken Biscuit. Expanding its breakfast business nationwide will give Wendy’s a chance to entice its current customers to visit more often, and might attract diners who already buy fast-food egg sandwiches and other fare elsewhere. Wendy’s could use the boost. Sales at Wendy’s have been growing at a slower clip than at larger burger rivals McDonald’s and Burger King, which have both offered breakfast items for years. And, of course, all the chains face competition from people opting to eat breakfast at home or grabbing quick meals from numerous other restaurants, including Starbucks, Dunkin’ and Chick-fil-A.

The Company is updating its 2019 outlook as it expects to make one-time upfront investments during 2019 of approximately $20 million to support the U.S. system in preparation of its national breakfast launch. To support the expansion into breakfast, Wendy’s plans on hiring about 20,000 additional workers. Wendy’s expects 2019 adjusted earnings per share to be down in the range of 3.5% to 6.5%. The FactSet consensus for 2019 EPS is 61 cents, up 3.2% from the last year. Global sales growth is expected to be 3% to 4%, while the FactSet consensus is for sales of $1.70 billion, up 6.7% For FY 19, the company expects adjusted EBITDA to be approximately flat to down 2 percent, cash flows from operations of approximately $290 to $305 million, free cash flow of approximately $215 to $225 million, down approximately 2.5 to 7.0 percent, general and administrative expense of approximately $195 million, adjusted tax rate of approximately 22 to 23 percent and capital expenditures to be in the range of approximately $75 to $80 million.

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