Hamburger chain Wendy's International (NYSE: WEN) recently announced that it has accelerated its stock buyback program, purchasing 9 million shares at an average price per share of $31.33, for a total of $300 million. Due to the decrease in the number of weighted average shares outstanding, Wendy's management has revised 2007 full-year EPS upwards. Previous guidance forecast EPS of $1.17 to $1.23. Now guidance projects 2007 EPS to be in the range of $1.26 to $1.32. This works out to a first quarter 2007 EPS of $0.11 to $0.14, compared to a net loss of $0.05 in first quarter 2006.
The good news regarding a forecast increase in EPS was tempered, however, by several factors that will negatively affect the company. Wendy's will close approximately 75 locations this year, 35 company-owned and 40 franchises. The company will incur closing and lease termination costs of approximately $4 million. Wendy's will spend $1.5 million in franchisee remodeling incentives and be subject to an effective tax rate of approximately 35% in first quarter 2007. Despite these factors, full-year earnings remain on target in the $330 to $340 million range.
Wendy's stock closed Friday, 30 March, at $31.30, up $0.17.
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