020424 Wendy's Shares Rise After Upbeat Outlook

New York - Shares of Wendy's International Inc. rose as much as 3.5% on Tuesday, a day after the nation's No. 3 hamburger chain reported better-than-expected sales in March and lifted its earnings guidance on the strength of a new salad line and cost controls.

Wendy's shares gained 2.8%, or $1.01, to $36.95 on the New York Stock Exchange in mid-morning trade after reaching a 52 week-high of $37.20 earlier in the session.

Its shares have gained 27% so far this year, compared with a drop of almost 2% in the Standard & Poor's 500 index.

Wendy's said that sales in its U.S. restaurants open at least a year rose a stronger-than- expected 6.1%. It also said it expects to report quarterly earnings of 39 cents a share, easily beating the Wall Street current consensus forecast of 36 cents, and lifted its 2002 earnings target to $1.85 to $1.90 from $1.83 to $1.88.

Salomon Smith Barney, J.P. Morgan, and Lehman Brothers lifted their earnings estimates.

"Results were driven by the success of the well-executed new Garden Sensations salad line," J.P. Morgan analyst John Ivankoe wrote in a research note. Given the strong results, Ivankoe raised his first-quarter estimate to 39 cents from 37 cents and lifted estimates for fiscal 2002 and 2003.

Separately, Lehman Brothers boosted its first-quarter EPS estimate by 2 cents to 39 cents, and lifted the fiscal 2002 and 2003 estimates by 4 cents to $1.89 and $2.10, respectively.

Salomon Smith Barney also raised its first-quarter EPS estimate by a penny to 39 cents per share, bringing its 2002 forecast to $1.89. However, it maintained its 2003 earnings estimate at $2.10.

Besides the new menu offerings and cost cuts, analysts said that Wendy's was benefiting from the perception of offering higher-quality food than competitors like McDonald's Corp. and Burger King, a unit of Diageo Plc .

"As consumers gravitate toward Wendy's relatively higher-quality menu, we believe that the concept will continue to make market share gains as it has over the last eight years," Salomon analyst Mark Kalinowski wrote in a note.

RETURN TO HOME PAGE

E-mail: sflanagan@sprintmail.com