RBC Capital Management reduced its target price on Wendy’s Co. to $8.00 from $8.50 on Monday while retaining a Sector Perform rating after the company published fourth-quarter results and provided fiscal 2026 guidance. Wendy’s stock was trading at $7.13 - close to its 52-week low of $7.08 - having declined 44.54% over the prior 12 months.
Company-reported fourth-quarter results were largely within expectations, but fiscal 2026 guidance disappointed the Street. Management signaled fiscal 2026 EBITDA and earnings per share guidance well below consensus, attributing the shortfall to higher general and administrative costs and increased interest expense. Those cost pressures pushed RBC and other analysts to reassess forward earnings estimates.
Same-store sales dynamics weighed on the outlook. January U.S. same-store sales were tracking to a negative 8% figure, although the company guided to a slightly smaller decline for the full quarter. By contrast, consensus estimates on the Street had been for a -2.4% result. The discrepancy has informed analyst revisions: InvestingPro data referenced in company commentary indicates 15 analysts have lowered earnings estimates for the upcoming period, and revenue growth for fiscal 2026 is now forecast at roughly 2%.
International trends also disappointed in the quarter. Fourth-quarter international same-store sales underperformed expectations by 295 basis points, with approximately half of the international segment mix coming from Canada. That marked the first international same-store sales decline in 20 quarters, with an overall international decrease of 2%.
Wendy’s continues to pay a dividend, and the company’s run-rate dividend is 56 cents compared with fiscal 2026 EPS guidance of 56 to 60 cents. The chain has sustained dividend payments for 24 consecutive years, and InvestingPro data show a current dividend yield of 7.49%. The company guided to free cash flow of $190 million to $205 million for fiscal 2026, versus an implied dividend payout of roughly $100 million.
Liquidity and cash generation metrics provide some context to the payout discussion. Wendy’s reported levered free cash flow of $242.62 million over the last twelve months and a free cash flow yield of 17%. The company’s liquid assets were reported to exceed short-term obligations, offering some near-term financial flexibility despite the revenue and sales challenges highlighted in its guidance.
On the operational side, management indicated menu innovation is being re-accelerated in the first quarter, with new items including a tender wrap and a burger coming through the pipeline. U.S. franchise same-store sales growth narrowed the gap to company-owned locations by 130 basis points quarter-over-quarter, and roughly 20% of franchisees have adopted Wendy’s operating plan, a point the company emphasized when discussing recovery and rollout of initiatives.
Analyst activity following the results has been active. RBC Capital’s Logan Reich lowered EPS estimates for Wendy’s, prompting the firm’s price-target reduction but no change to its Sector Perform stance. Other broker actions included Bernstein SocGen Group trimming its price target from $10.00 to $9.00 while maintaining a Market Perform rating, and KeyBanc keeping a Sector Weight rating and flagging a weak sales outlook.
Despite a number of operating and sales headwinds, the company’s most recent quarterly results included positive beats on the headline numbers: adjusted EPS for fourth-quarter 2025 came in at $0.16 versus a forecasted $0.15, and revenue was $543 million against a projection of $537.55 million. Those beats did not, however, offset the material declines in same-store sales - global same-store sales fell 10.1% and U.S. locations declined 11.3% - trends that were prominently discussed on the company’s earnings call.
The combination of weak same-store sales, higher operating and interest expenses, and lowered fiscal guidance has translated into downward analyst revisions and a lower price target from RBC Capital. Management’s guidance for free cash flow and the company’s liquidity position provide a partial buffer for the dividend and near-term obligations, but sales momentum and cost trends remain central to the firm’s ability to restore its prior growth trajectory.
Key points
- RBC cut its target price on Wendy’s to $8.00 from $8.50 while keeping a Sector Perform rating after fiscal 2026 guidance missed consensus.
- Sales weakness is pronounced - January U.S. comps tracked to -8% and global same-store sales declined 10.1% in the quarter; international comps fell 2% and missed by 295 basis points.
- Cash flow and liquidity show some resilience - levered free cash flow of $242.62 million over the last twelve months and a free cash flow yield of 17%, with liquid assets exceeding short-term obligations.
Risks and uncertainties
- Persistently weak same-store sales, particularly in the U.S. and international markets, could further pressure revenue and margins - impacting the consumer discretionary and restaurant sectors.
- Rising general and administrative expenses and higher interest costs reduced fiscal 2026 EBITDA and EPS guidance, posing execution and cost-control risks for the company and affecting investor sentiment in the foodservice sector.
- Analyst downward revisions and lowered price targets underscore uncertainty around earnings recovery and dividend coverage if free cash flow underperforms guidance, with implications for equity valuations in the restaurant industry.
Conclusion
Wendy’s faces a challenging outlook driven by weaker same-store sales and elevated expenses that have forced analysts to trim earnings forecasts and price targets. While cash flow metrics and liquidity provide some near-term flexibility, restoring sales momentum and controlling costs will be necessary for the company to materially improve its guidance and market valuation.