Wendy's (WEN) reported fiscal Q4 results that are "in line" with Wall Street expectations but projected 2026 earnings missed estimates as the company launched a restructuring plan dubbed "Project Fresh," Morgan Stanley said in a report Tuesday.

The fastfood chain plans to close 5% to 6^ of its US restaurants, or about 330 locations, by the end of 2026, with most of the closures expected in H1, the report said, adding that the move comes as the company issued 2026 earnings guidance "well below expectations," forecasting adjusted EPS between $0.58 and $0.60, compared with analyst estimates of $0.85.

Under Project Fresh, Wendy's is seeking to revitalize its brand through "menu innovation" and operational improvements, including the launch of its $4, $6 and $8 "Biggie Platform" and plans to roll out new chicken items and burger offerings later this year, the report said.

Morgan Stanley also said that while the outlook is "not pretty," the aggressive cuts and system optimizations may signal a bottom for the company's stock, which has struggled against competitors.

Despite these initiatives, the company continues to face headwinds, with US same-store sales declining by double digits in late 2025 and international growth remaining sluggish, according to the report.

Morgan Stanley has and underperform rating on Wendy's and lowered its price target to $7 from $8.

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