Wendy's (WEN) Surges 15.2%: Is This an Indication of Further Gains?

Wendy's (WEN) shares rallied 15.2% in the last trading session to close at $7.07. This move can be attributable to notable volume with a higher number of shares being traded than in a typical session. This compares to the stock's 6.1% loss over the past four weeks.

Wendy’s shares climbed after an investor group led by Nelson Peltz’s Trian Fund Management reportedly made a cash offer of $7.35 per share to acquire the fast-food chain. The proposal values the company at approximately $1.4 billion and offers a premium over its previous closing price, fueling investor optimism about a potential takeover.

This hamburger chain is expected to post quarterly earnings of $0.09 per share in its upcoming report, which represents a year-over-year change of -62.5%. Revenues are expected to be $539.44 million, down 1.8% from the year-ago quarter.

While earnings and revenue growth expectations are important in evaluating the potential strength in a stock, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

For Wendy's, the consensus EPS estimate for the quarter has been revised 1.3% higher over the last 30 days to the current level. And a positive trend in earnings estimate revision usually translates into price appreciation. So, make sure to keep an eye on WEN going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Wendy's belongs to the Zacks Retail - Restaurants industry. Another stock from the same industry, Red Robin (RRGB), closed the last trading session 9.8% higher at $8.99. Over the past month, RRGB has returned 7.1%.

Red Robin's consensus EPS estimate for the upcoming report has remained unchanged over the past month at -$0.68. Compared to the company's year-ago EPS, this represents a change of +2.9%. Red Robin currently boasts a Zacks Rank of #5 (Strong Sell).

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This article originally published on Zacks Investment Research (zacks.com).

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