Leading fast food hamburger chain Burger King Worldwide, Inc. reached a new 52-week high of $27.85 per share on Mar 12. Shares surged on the back of a large number of restaurants opened recently.
Shares of Burger King eventually closed at $27.85, representing a 50.9% year-to-date increase.
Recently, Burger King announced that it is set to unveil three restaurants in Martinique, an island in the eastern Caribbean Sea in an overseas region of France. Last month, Burger King unveiled a restaurant in Brunei, Darussalam in collaboration with a franchise partner, Sinofood Express. This marks Burger King’s debut in Brunei.
The restaurant openings are part of the company’s aggressive plans to expand in international markets.
The company hasinternational ventures in key markets like Russia, China, Mexico, France, Central America, South Africa, Singapore, Malaysia, Korea and Vietnam. In the fourth quarter,the company entered into a joint venture agreement with Everstone Group as per which Everstone will act as Burger King’s long-term master franchisee and developer of new restaurants across India.
The recent restaurant openings are of particular interest to investors as franchising a large chunk of its system facilitates the company’s earnings and return on equity growth by reducing capital requirements. Burger King’s franchised business model allows it to generate strong free cash flow, thereby helping it to maintain a healthy balance sheet. Since a major portion of its business is franchised, Burger King is less likely to be affected by inflation compared to its peers.
This Zacks Rank #3 (Hold) company posted mixed fourth-quarter 2013 results in Jan 2014 with earnings in line with the Zacks Consensus Estimate but revenues missing the same. However, driven by net restaurant growth and higher comps in the Europe, Middle East and Africa and Asia Pacific regions, organic revenues grew 5.2%.
Some other stocks worth considering in the restaurant industry include Famous Dave's of America Inc. (DAVE - Snapshot Report) , Jack in the Box Inc. (JACK - Analyst Report) and Brinker International, Inc. (EAT - Analyst Report) . While Famous Dave's of America sports a Zacks Rank #1 (Strong Buy), Brinker International and Jack in the Box holds a Zacks Rank #2 (Buy).
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