NEW YORK (AP) — Wendy's stock fell nearly 4 percent on Friday as a Morgan Stanley analyst lowered his rating on the hamburger chain, saying it may take the company more time to reach its goals than the market currently expects.
THE SPARK: Analyst John Glass cut Wendy's Co. to "Underweight" from "Equal-weight" with a price target of $5.
THE BIG PICTURE: On Thursday Wendy's said that about 20 percent of its U.S. locations will be remodeled by 2015. The Dublin, Ohio, company has about 6,500 locations, primarily in North America.
THE ANALYSIS: Glass said in a client note that Wendy's will have to increase its capital spending to remodel the stores, which will require strong sales to generate adequate returns and leave the company without free cash flow for the next several years.
Still, Glass said that Wendy's current management is "the strongest in recent memory," and he believes that repositioning the company as a purveyor of more premium food makes intuitive sense.
SHARE ACTION: Wendy's shares fell 21 cents, or 3.7 percent, to $5.49 in afternoon trading. The stock has traded between $4.09 and $5.95 over the past 52 weeks.