Wendy's Downgraded To Neutral At J.P. Morgan On Capital Expenditure Levels

The Wendy's Co. was downgraded to neutral from overweight after analysts determined the company won't lower its capital expenditures. The price target was lowered to $10.50 from $12. J.P. Morgan upgraded Wendy's on Aug. 6, 2015 believing the company's fiscal 2017 and 2018 capital expenditure guidance of $150 million was too high if there would be fewer than 400 company stores by the end of fiscal 2016. Analysts expected strong free cash flow. "We would have thought that capital expenditures could/should come down as we find it hard to articulate company operated U.S. unit expansion and more, so difficult to agree with $20-$25 million a year of company funding for franchisee capex in Canada," J.P. Morgan wrote in a Thursday note. "However, this appears to be the plan of the well-respected and newly appointed Chief Executive Todd Penegor, so expecting a near-term change in a just-announced strategy is unlikely in our view." Wendy's shares are inactive in premarket trading, but down 12.7% for the past 12 months. The S&P 500 is down 10.5% for the same period.