Wendy's Co. on Wednesday raised a long-term earnings growth target and detailed plans to buy back up to $1.4 billion in shares by the end of 2016, noting that the fund led by activist investor Nelson Peltz could pare its stake in the burger chain by another 8%.
Shares gained 3.6% to $11.50 a share in premarket trading.
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Wendy's updated its guidance to account for the share buyback program, the sale of its Ohio bakery and its recently completed $2.3 billion securitization refinancing.
Like many other restaurant chains, including McDonald's Corp. and Burger King Worldwide Inc., Wendy's has been selling off its company-owned restaurants to franchisees to ensure a more predictable cash flow and higher margins.
Wendy's said it now expects its per-share earnings to grow by more than 20% beginning in 2018. It had previously forecast growth in the mid-to-high teens. The company backed its other long-term earnings and sales targets.
Meanwhile, Wendy's lowered its capital spending forecasts for each the next three years by about $5 million each, mostly to account for the bakery sale.
For 2015, the company now expects its per-share earnings to come in at 31 cents to 33 cents, excluding 2 cents a share in earnings from the sold bakery business.
Wendy's said it would begin an $850 million buyback program on Wednesday and plans to use the remaining $550 million of the authorization by the end of 2016.
Wendy's also will buy up to $211 million in shares from Mr. Peltz's Trian Fund Management LP, which is looking to reduce its stake from 24.8% to between 17% and 19.7%. Trian, which attempted to buy Wendy's several years ago, will remain the company's largest shareholder.