Wendy's backs full-year profit target after narrow beat, shares rise

(Reuters) - Wendy's Co WEN.O stuck to its full-year profit forecast on Wednesday after edging past analysts' estimates for second quarter in the face of a handful of major marketing investments by some of its biggest rivals, sending its shares 7% higher.

FILE PHOTO: A signboard of Wendy's fast food restaurant is pictured in Tokyo, Japan, September 26, 2017. REUTERS/Kim Kyung-Hoon/File Photo

The results come weeks after other established restaurant chains such as McDonald's Corp MCD.N, Chipotle Mexican Grill CMG.N and Starbucks Corp SBUX.O reported solid growth, driven by new menu additions and expanded delivery services.

Wendy’s has also revamped its menus, launching the “$5 Biggie Bag combo”, expanding its “Made to Crave” menu and adding a parmesan caesar chicken salad to its offering.

“We are pleased with Wendy’s performance given McDonald’s best U.S. comparable performance since 4Q15,” Cowen analyst Andrew Charles said.

Wendy’s has also invested in remodeling its restaurants and adding kiosks, while ramping up delivery through a partnership with DoorDash.

More than 80% of the burger chain’s U.S. restaurants were covered by the DoorDash service at the end of second quarter, the company said.

These efforts lifted North America same-stores sales growth 1.4% in the quarter, slightly above analysts’ average estimate of 1.36%.

Chief Executive Officer Todd Penegor on a post-earnings call said he was also looking at including plant-based proteins in the company’s menu.

Meat alternatives from companies such as Beyond Meat Inc BYND.O and its competitor Impossible Foods have seen booming demand from consumers and restaurants.

Excluding certain items, Wendy’s posted adjusted profit of 18 cents per share in the quarter, beating estimates by 1 cent, according to IBES data from Refinitiv.

The company also reaffirmed its full-year adjusted profit forecast of about 3.5% to 7% growth, which Bernstein analyst Sara Senatore said was “likely to be viewed positively.”

But Wendy’s total revenue of $435.3 million came in below estimates of $439.9 million.

Shares, which have gained 16% this year, were up 7% at $19.37.

Reporting by Soundarya J in Bengaluru; Editing by Bernard Orr, Sriraj Kalluvila