The Wendy’s Co (WEN), Dunkin Brands Group Inc (DNKN): Fast Food Trends to Help You Make Money

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The Wendy’s Co (NASDAQ:WEN) franchises and operates 6,544 restaurants in the U.S. and 27 countries and is approaching an 85% franchisee run rate. The company raised the yield this year 25% (100% last year) and has in place a $100 million share repurchase plan through the year end.

The Wendy’s Co (NASDAQ:WEN) is in the midst of major revamping (flat screen TVs, cozier seating, fireplaces) at most of its restaurants, expected to complete by 2015. Closings during remodeling and expenses may ding the bottom-line.

On July 23, it announced Q2 results  beating expectations with a 60% improvement of adjusted EPS year over year and margin expansion taking shares up over 12%. The company also doubled previous guidance for EPS growth this coming year based on selling 425 of its restaurants to franchisees, expecting increased margin expansion with lowered costs and increased rental and royalty fees. Goldman Sachs liked the sale, upgrading the stock from sell to neutral.

Slowly growing margin expansion was cited in June by Wells Fargo for its Market Perform rating, although it noted EV/EBITDA is better than competitors’. Price to sales at 1.16 and price to book at 1.48 aren’t bad.

America runs on pretzels and caramel

Dunkin Brands Group Inc (NASDAQ:DNKN)’ is also running limited time only availability of its new Pretzel roll roast beef sandwich. That same pretzel roll is available to top any other sandwich as well. The company is featuring three new caramel flavors for iced coffee: coconut, almond, and caramel turtle. Baskin-Robbins keeps the caramel theme going with Flavor of the Month, Oreo nutty salted caramel.

Dunkin Brands Group Inc (NASDAQ:DNKN)’ has 10,500 restaurants in 31 countries and reported sales for 2012 of $6.9 billion. Dunkin Brands Group Inc (NASDAQ:DNKN)’ also owns 7,000  Baskin-Robbins ice cream stores in over 50 countries, making Baskin-Robbins the world’s largest specialty ice cream chain. Of note, both divisions are almost 100% franchisee operated.

Like these other two, Dunkin Brands Group Inc (NASDAQ:DNKN)’ is cozying up the joints. Franchisees get three decor options, giving customers a more inviting space to dawdle. This is another quick serve trend gaining traction.

Dunkin Brands Group Inc (NASDAQ:DNKN) has a market cap of $4.73 billion. It is trading at a 37.38 trailing P/E with a 1.70% yield. The stock is up 45% over 52 weeks and its price/book is high at 13.33. However, operating margin at 42.73% is impressive and analysts expect 16.04% five year EPS growth.

That growth is certainly doable after Q2 results of 420 basis points adjusted operating income margin expansion to 50%, a 24% increase of adjusted EPS to $0.41, and comp store sales improvement of 4%. The company has been buying back shares aggressively with 400,000 shares in Q2 alone and $33 million remaining.

Trends with traction

Besides on these flavor trends, you probably noticed trends to higher franchisee percentages, share buybacks, and renovations. These three companies are all trading near highs, but are innovating, renovating, and repurchasing. Maybe it’s time to bite off a little yourself.

AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Fast Food Trends to Help You Make Money originally appeared on Fool.com is written by AnnaLisa Kraft.

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