Wendy's Q2 2025 Earnings: A Bear Case for Selling Amid Weak Demand and Revisions

The quick-service restaurant (QSR) sector has long been a barometer for consumer sentiment, and Wendy's (WEN) Q2 2025 earnings report—scheduled for August 8—has become a focal point for bears. Analysts have slashed their earnings estimates by 0.8% over the past month, projecting a 7.4% year-over-year decline in EPS to $0.25. Revenue forecasts also point to a 2.7% drop to $555.52 million, with franchise royalty and advertising revenue shrinking by 2.6% and 3.9%, respectively. These revisions, coupled with a Zacks Rank of #4 (Sell) and a negative Earnings ESP of -0.10%, paint a grim picture. Let's break down why this stock is a sell, not a buy.

Analyst Revisions: A Canary in the Coal Mine

The downward revisions to Wendy's earnings estimates are not just numbers—they're a signal. Analysts are factoring in a broader economic slowdown, with consumers tightening their belts and shifting spending habits. Wendy's own guidance cut for 2025, now projecting adjusted EPS of $0.92–$0.98 (down from $0.98–$1.02), underscores this bearish narrative. Even with 5.4% systemwide sales growth in Q1 2025, the company's profitability is under pressure. The market isn't buying the story: WEN's stock has underperformed the S&P 500 by 15% year-to-date, and with no analyst upgrades in sight, the bear case is only strengthening.

Historical data from 2022 to 2025 reveals a troubling pattern for WEN investors. In the 3-day, 10-day, and 30-day periods following earnings releases, the stock has posted negative returns in most instances. The 3-day win rate stands at just 42.86%, while the 10-day and 30-day win rates fall to 28.57%, indicating a low probability of positive outcomes. The maximum observed return of 0.25% on August 5, 2025, further highlights the limited upside. These results reinforce the bearish thesis: past earnings events have consistently failed to deliver meaningful gains, and the current environment suggests this trend is unlikely to reverse.

Traffic Trends: A Tale of Two Sides

Wendy's Q2 2025 traffic trends tell a mixed story. While Q3 saw a rebound with 2.8% global same-store sales growth, driven by new menu items like the Frosty Cream Cold Brew and Loaded Nacho Cheeseburger, the first half of the year was brutal. Q1's 2.8% same-store sales decline and 3.4% drop in average visits per location highlight a struggle to retain customers. The company's “barbell menu” strategy—offering both high and low-priced items—has helped, but it's not enough to offset the broader economic headwinds. Lower-income consumers, who make up a significant portion of Wendy's base, are trading down from QSR to home-cooked meals, while higher-income households remain stable. This bifurcation leaves Wendy's in a precarious position: it's not winning on either end.

Valuation Dislocation: Cheap, But Not a Bargain

Wendy's current valuation metrics—while seemingly attractive—mask deeper issues. The stock trades at a P/E ratio of 11.41, below its 10-year average of 25.09 and the industry average of 21.7. Its P/S ratio of 0.92 is also lower than peers like McDonald's (8.56) and Yum! Brands (5.08). On the surface, this looks like a discount. But when you factor in the company's weak earnings revisions, declining revenue streams, and a Zacks Sell rating, the “cheap” label becomes misleading. The EV/EBITDA ratio of 8.61 is undervalued compared to the industry median of 11.63, but this dislocation reflects a lack of confidence in Wendy's ability to sustain growth.

The Bottom Line: Sell and Wait

Wendy's Q2 2025 earnings report will be a critical test. If the company misses estimates—likely given the negative Earnings ESP—expect a sharp selloff. Even a beat might not be enough to reverse the bearish momentum, as analysts will focus on the broader trends: weak demand, stagnant traffic, and a valuation that's priced in more optimism than the fundamentals justify. For now, this stock is a sell. Investors should wait for clearer signs of a turnaround, such as sustained same-store sales growth, a rebound in franchisee confidence, or a meaningful shift in consumer behavior. Until then, the bear case remains intact.

Final Call: Short-term bears should consider selling WEN ahead of the earnings report. Long-term investors should wait for a catalyst—like a successful menu innovation or a shift in the economic climate—before re-entering. For now, the Frosty isn't melting—it's freezing.