Wendy's bucks market slide: up on a down day

[June 02, 2012]  NEW YORK (AP) -- Wendy's shares managed to climb Friday while most of the market was falling.

The fast-food chain got a boost after two analysts at Janney Capital Markets upgraded its stock to "buy" from "neutral."

Analysts Mark Kalinowski and Edward Grace gave several reasons for optimism. They predicted that May sales would turn out to be better than expected, and they're hearing more chatter about the chain going private. They also said they're hearing anecdotally that franchisees are getting the financing they need to remodel stores.

Still, theirs is a contrarian view. Of 14 research firms surveyed by FactSet, only Janney and two others list Wendy's as a buy. The rest rate it a hold. Wendy's Co. is in the middle of reinventing itself, trying to shake customer perceptions that its stores and menu were outdated. It's brought in new executives and separated from Arby's. It's modernizing the restaurants and overhauling the menu. Even so, the chain last month lowered its earnings expectations for the year, citing higher beef costs and weaker-than-expected sales.

A Wendy's spokesman declined to comment on whether the company is considering going private. But the Janney analysts note that it's been a successful path for other fast-food chains. Burger King and CKE Restaurants, which owns Carl's Jr. and Hardee's, were both bought by private investors in 2010. Both recently announced that they plan to go public again. Investors will often buy a company that they believe is struggling, spend a few years shaking it up, and then take it public again when they believe the market will give them a return on their investment.

On Friday afternoon, Wendy's shares were up 7 cents to $4.66. The Dow Jones industrial average was down about 2 percent, and nearly 85 percent of the stocks on the New York Stock Exchange were trading down. McDonald's Corp. was down almost 3 percent.

But even with Friday's boost, Wendy's is still off about 13 percent for the year so far -- though the Janney analysts said that meant the stock could be priced right for buyers.

Two other publicly traded restaurant chains, P.F. Chang's China Bistro Inc. and Benihana, announced in May that they plan to go private.

[Associated Press]

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