Benzinga | Nov 5, 2020 10:55AM EST

Wendy's Strong Q3, Momentum Prompts Upgrade

Fast food chain Wendys Co (NASDAQ:WEN) reported third-quarter results that prompted BofA Securities analyst to turn bullish on the stock.

The Wendys Analyst: Gregory Francfort upgraded Wendys from Neutral to Buy with a price target lifted from $24 to $26.

The Wendys Thesis: Wendys' third-quarter report makes it clear the company is well-positioned to win market share in the restaurant space, Francfort wrote in the note. This was evident in the third-quarter report as the company continues to show impressive comps at a time when rival Mcdonald's Corp (NYSE:MCD) is showing strong sales.

Specifically, third-quarter EBITDA of $119 million exceeded estimates of $110 million while strong comps of 7% in the quarter continued into October at 6.6%.

Related Link: Wendy's: Q3 Earnings Insights

Meanwhile, Wendy's continued store remodeling process stands at more than 60% and should prove to be a catalyst to drive further share gains.

Francfort said management also deserves credit for keeping expenses low despite investments in new products and technology and last year's expansion into breakfast.

The research firm's revised $26 price target is based on a revised multiple of 19 times 2021 EV/EBITDA that is consistent with McDonald's target multiple.

WEN Price Action: Shares of Wendys were trading higher by 2.6% to $21.79 at publication time.