Zacks Investment Research downgraded shares of The Wendy's Company (WEN) from OUTPERFORM to NEUTRAL on June 26, 2014, with a target price of $9.00.
We revert to a Neutral recommendation on Wendy's from Outperform owing to continued weakness in revenues and higher-than-expected beef costs. Though its adjusted earnings of $0.07 per share beat the Zacks Consensus Estimate and grew year over year, revenues declined yet again in the first quarter due to the company's system optimization initiative. Per the initiative, the company has lowered its restaurant ownership from 22.0% to 15.0%, which will pressurize revenues in the near term. Moreover, higher beef costs are expected to weigh on margins, mainly in the second and third quarter of the year. Nevertheless, over the long-term, we remain optimistic on the company's sales initiatives, which include menu innovation, international expansion and re-imaging of units.
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