Wendy's Q4 Earnings Beat Expectations, Accelerated Growth Investments And Dividend Cut On The Menu

Wendy's Company (WEN) has been making waves in the quick-service restaurant (QSR) industry, and its latest earnings report is no exception. The company reported strong fourth-quarter and full-year 2024 results, surpassing analyst estimates and setting the stage for accelerated growth. Let's dive into the key takeaways and what they mean for investors.



Q4 Earnings Beat Expectations

Wendy's reported fourth-quarter sales growth of 6.2% year-on-year to $574.27 million, beating the analyst consensus estimate of $563.637 million. The increase in revenues was driven by increases in franchise fees, Company-operated restaurant sales, advertising funds revenue, and franchise royalty revenue. Adjusted revenues increased 6.4% to $459.3 million. Systemwide sales in the U.S. rose 4.5%, and International Jumped 11.3%. Global same-restaurant sales growth was 4.3%. U.S. company-operated restaurant margin was 16.5% versus 13.5% a year ago.



Operating Income and Adjusted EBITDA Increase

Operating income for the quarter rose 10.9% Y/Y to $96 million. Adjusted EBITDA increased 8.6% Y/Y to $137.5 million. Adjusted EPS of $0.25 beat the consensus estimate of $0.24. The company held $503.61 million in cash and equivalents as of December end. Operating cash flow for the year totaled $355.31 million, with a free cash flow of $278.95 million.

Capital Allocation Shift

The company declared its regular quarterly cash dividend to $0.25 per share, payable on March 17, 2025, to shareholders of record as of March 3, 2025. The company said its new target dividend payout ratio is 50% to 60% of adjusted earnings. As a result, beginning in the second quarter of 2025, the company expects to pay a quarterly dividend of $0.14 per share. Additionally, Wendy's plans to repurchase up to $200 million of its shares in 2025, with a majority of the shares expected to be acquired over the next few months.



Outlook and Growth Opportunities

Wendy's expects FY25 adjusted EPS of $0.98 – $1.02 versus the consensus of $1.03. WEN sees FY25 global systemwide sales growth of 2.0% – 3.0%. The company expects FY25 adjusted EBITDA of $550 million – $560 million. President and CEO Kirk Tanner expressed excitement about the opportunities ahead, stating that the company's new capital allocation policy will enable it to pursue these opportunities and maximize long-term shareholder value.



In conclusion, Wendy's Q4 earnings beat expectations, with strong sales growth and improved profitability. The company's shift in capital allocation, prioritizing share repurchases over dividends, signals confidence in its future growth prospects. As an investor, it's essential to stay informed about these strategic moves and consider the potential impact on your portfolio. Keep an eye on Wendy's as it continues to accelerate its growth and maximize shareholder value.