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Why Is Restaurant Brands (QSR) Down 2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Restaurant Brands (QSR - Free Report) . Shares have lost about 2% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Restaurant Brands due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Restaurant Brands Q4 Earnings Top Estimates, Rise Y/Y

Restaurant Brands reported impressive fourth-quarter 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Moreover, the metrics increased on a year-over-year basis. The quarterly results benefited from a rise in comparable sales and unit growth (across its segments) as well as from growing loyalty and e-commerce platform.

Earnings & Revenue Discussion

During fourth-quarter 2021, the company reported adjusted earnings per share (EPS) of 74 cents, beating the Zacks Consensus Estimate of 70 cents by 5.7%. The bottom line increased 39.6% year over year from an adjusted EPS of 53 cents reported in the prior-year quarter.

Quarterly net revenues of $ 1,546 million surpassed the consensus mark of $1,496 million. The top line increased 13.8% on a year-over-year basis, owing to higher system-wide sales in all of its brands and performance growth across the Tim Hortons and Burger King segments.

Segmental Revenues

Restaurant Brands operates through three segments — Tim Hortons, Burger King and Popeye’s Louisiana Kitchen.

During fourth-quarter 2021, revenues in Tim Hortons totaled $916 million, up 17.1% from the prior-year quarter’s levels. System-wide sales increased 14% year over year against a fall of 12.9% reported in the prior-year quarter. Comps in the segment rose 10.3% year over year versus an 11% decline in the year-ago quarter. In the quarter under review, net restaurant growth was recorded at 6.9% compared with 0.3% in the prior-year quarter.
 
Burger King’s revenues totaled $480 million in fourth-quarter 2021, indicating growth of 10.6% from the prior-year quarter’s levels. System-wide sales growth in the segment increased 15.4% year over year against an 8.1% decline in the prior-year quarter. Comps rose 11.3% year over year against a 7.9% fall reported in the prior-year quarter. In the fourth quarter, net restaurant growth was 3.3% against a 1.1% decline reported in the prior-year quarter.

Popeye’s Louisiana Kitchen generated revenues of $145 million in fourth-quarter 2021, up 2.1% from the prior-year quarter’s levels. System-wide sales growth came in at 7.2% year over year against a decline of 0.9% recorded in the prior-year quarter. Net restaurant growth came in at 7.4% compared with 4.1% growth in the prior-year quarter. Comps in the segment dropped 0.4% compared with a fall of 5.8% reported in the prior-year quarter.

Operating Performance

In the quarter under review, the company’s adjusted EBITDA increased 16.6% year over year to $584 million. On an organic and reported basis, the upside was driven by an increase in Tim Hortons, Burger King and Popeye’s adjusted EBITDA.

Segment-wise, Tim Horton’s adjusted EBITDA increased 13.1% from the year-ago quarter’s figure. Burger King’s adjusted EBITDA rose 22% year over year. Moreover, Popeye’s adjusted EBITDA moved up 5.6% from the year-ago quarter’s levels.

Cash and Capital

Restaurant Brands ended the fourth quarter with a cash and cash equivalent balance of $1,087 million compared with $1,560 million reported in the prior-year period. As of Dec 31, 2021, long-term debt (net of current portion) stood at $12.9 billion compared with $12.4 billion as of Dec 31, 2020.

The company’s board of directors announced a dividend payout of 54 cents per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership for first-quarter 2022. The dividend is payable on Apr 6, 2022, to shareholders of record at the close of business as of Mar 23, 2022.

2021 Highlights

Total revenues in 2021 amounted to $5,739 million compared with $4,968 million in 2020.

Adjusted EBITDA in 2021 came in at $2,248 million compared with $1,864 million in 2020.

In 2021, diluted earnings per share (EPS) came in at $2.82 per share compared with $2.03 reported in the previous year.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Restaurant Brands has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Restaurant Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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