Strong 2Q Margins For WEN, JP Morgan Remains Neutral

Wendy's/Arby's Group, Inc. (NYSE: WEN) reported Wendy's in-line with 2Q estimates from JP Morgan, as comps were reported to be down 1.7% vs. down 0.5%, and margins of 16.4% vs. 15.9% last year (JP Morgan estimated 16.4%) were very strong given 90bp of commodity pressure and negative comp trends.

Arby's continues to decline in sales, amounting to ~20% for FY2010. Margins have not been devastated to the degree comps would suggest, with 2Q being down only 150bp to 13.4% over one year ago. Store closures have not been an issue, but investors must watch for possible acceleration in comp trends over the next 12 months.

JP Morgan maintains its Neutral rating for Wendy's/Arby's Group, Inc., which closed yesterday at $4.14.