Why Wendy's Stock Popped Today
Key Points
Declining sales and rising costs are denting Wendy's bottom line.
Yet Nelson Peltz reportedly sees value in the company's depressed stock price.
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Shares of Wendy's (NASDAQ: WEN) rallied on Tuesday as rumors of a potential buyout swirled.
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Return of the chairman
Activist investor Nelson Peltz is reportedly in discussions to raise capital for a takeover bid on the beleaguered restaurant chain, according to the Financial Times.
Peltz, his investment firm Trian Fund Management, and Trian's co-founder Peter May are believed to own roughly 40% of Wendy's shares.
Peltz oversaw the combination of Wendy's with Arby's restaurants back in 2008. He went on to serve as the company's chairman from 2008 to 2024. May and Peltz's son, Bradley are still members of Wendy's board of directors.
Wendy's struggles
The talks come as Wendy's is facing a host of challenges.
Revenue across its more than 7,000 restaurants fell 5.5% to $3.2 billion in the first quarter. Same-store sales at the company's U.S. locations sank 7.8% as cash-strapped consumers dined out less often and competition from value-focused rivals like McDonald's intensified.
Higher beef and labor costs are also biting into the fast-food chain's profits.
Wendy's share price, in turn, is down 35% over the past year, even after today's gains.
Could Wendy's stock be a bargain?
Peltz, however, sees value in the burger maker's shares.
Wendy's trades for about 12 times its forward earnings projections, compared to more than 20 for McDonald's.
Perhaps Peltz is also intrigued by Wendy's recently announced plans to open 1,000 new franchised restaurants in China over the next decade.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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