Wendy's Gears Up for Q4 Earnings: Weak Traffic & U.S. Trends in Focus

Core Insights - The Wendy's Company (WEN) is set to report its fourth-quarter 2025 results on February 13, with earnings expected to decline significantly year-over-year [1][8] Financial Estimates - The Zacks Consensus Estimate for earnings is 16 cents per share, reflecting a 36% decrease from the previous year [2] - Revenue estimates are pegged at $547 million, indicating a 4.8% decline compared to the same quarter last year [2] Performance Factors - The U.S. business is a primary concern, with traffic softness impacting sales due to consumer strain and competition in the quick-service restaurant (QSR) burger sector [3] - Promotions like the $5 Biggie Bag have engaged existing customers but have not effectively attracted new ones, limiting traffic growth [3] - The company is focusing on reducing promotional complexity and has postponed some initiatives to 2026, which may hinder short-term sales growth [3] Strategic Initiatives - Project Fresh involves reviewing and potentially closing a mid-single-digit percentage of underperforming U.S. restaurants, which may negatively affect near-term sales growth despite long-term benefits [4] - The shift from prioritizing U.S. net unit growth to improving average unit volumes (AUVs) is expected to reduce revenue contributions from new stores [4] - Breakfast sales continue to lag behind other meal periods, further constraining domestic sales momentum [4] Sales Predictions - The model predicts a 4.9% decrease in U.S. systemwide same-restaurant sales, while international same-restaurant sales are expected to increase by 0.9% [5] Profitability Concerns - Continued cost pressures from commodity inflation, particularly high beef prices, and labor inflation are likely to impact restaurant margins [6] - Despite maintaining disciplined pricing and benefiting from productivity improvements, declining traffic is creating negative operating leverage [6] - Margin contraction at U.S. company-operated restaurants, combined with persistent input cost inflation, could adversely affect fourth-quarter earnings [6] Earnings Outlook - The Zacks model does not predict an earnings beat for Wendy's this quarter, with an Earnings ESP of +13.93% but a Zacks Rank of 4 (Sell) [7]