Restaurant Brands International, Inc. (QSR Quick QuoteQSR - Free Report) reported impressive second-quarter 2023 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis. The upside was primarily driven by strong global comparable sales, unit growth and a healthy balance of traffic and check.

Earnings & Revenue Discussion

In the quarter under review, the company reported adjusted earnings per share (EPS) of 85 cents, surpassing the Zacks Consensus Estimate of 76 cents. The bottom line increased 3.7% from an adjusted EPS of 82 cents reported in the prior-year quarter.
 

Quarterly net revenues of $1,775 million surpassed the consensus mark of $1,746 million. The top line increased 8.3% on a year-over-year basis. The upside was driven by a rise in system-wide sales at Tim Hortons, Burger King, Popeyes and Firehouse Subs. However, this was partially offset by unfavorable FX movements.

During the quarter, global system-wide sales grew 14% year-over-year.

Segmental Revenues

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

In the second quarter, revenues in Tim Hortons totaled $1,016 million, up 5% from the prior-year quarter’s levels. Our estimate for the metric was $1,029.7 million. System-wide sales increased 15% year over year compared with growth of 16.3% reported in the prior-year quarter. Comps in the segment rose 11.4% year over year compared with a 12.2% rise reported in the year-ago quarter. In the quarter under review, net restaurant growth was recorded at 5.8% compared with an increase of 5.7% reported in the prior-year quarter.

During the quarter, Burger King’s revenues totaled $529 million, indicating growth of 11.8% from the prior-year quarter’s levels. Our estimate for the metric was $436.2 million. System-wide sales growth in the segment increased 13.8% year over year compared with a 13.2% growth reported in the prior-year quarter. Comps rose 10.2% year over year compared with an 8.7% increase reported in the prior-year quarter. In the second quarter, net restaurant growth was 2.4% compared with an increase of 2.7% reported in the prior-year quarter.

Popeye’s Louisiana Kitchen generated revenues of $183 million in second-quarter 2023, up 10.9% from the prior-year quarter’s levels. Our estimate for the metric was $166.1 million. System-wide sales growth came in at 15.0% year over year compared with a 9.9% growth recorded in the prior-year quarter. Comps in the segment rose 6.3% year over year against a 1.4% decline reported in the prior-year quarter. Net restaurant growth came in at 10.9% compared with an 8.1% growth reported in the prior-year quarter.

During the quarter, Firehouse Subs generated revenues of $48 million, indicating growth of 45.5% from the prior-year quarter’s levels. Our estimate for the metric was $38.9 million. System-wide sales growth came in at 5.1% year over year compared with the 2.2% growth recorded in the previous quarter. Net restaurant growth came in at 2.1% year over year compared with an increase of 2.5% reported in the previous quarter. Comps in the segment rose 2.1% year over year compared with a 1.4% fall in the previous quarter.

Operating Performance

In the quarter under review, the company’s adjusted EBITDA came in at $665 million compared with $618 million reported in the prior-year quarter. On a reported basis, the upside was driven by increases in BK, TH and PLK adjusted EBITDA. However, this was partially offset by unfavorable FX movements.

Segment-wise, Tim Horton’s adjusted EBITDA increased 5.8% year over year to $290 million. Burger King’s adjusted EBITDA increased 6.7% year over year to $288 million. Popeye’s adjusted EBITDA came in at $73 million, up 19.7% year over year. During the quarter, Firehouse Subs’ adjusted EBITDA increased 7.7% year over year to $14 million.

Cash and Capital

Restaurant Brands ended the second quarter with a cash and cash equivalent balance of $1,213 million compared with $1,178 million reported in 2022-end. As of Jun 30, 2023, long-term debt (net of current portion) stood at $12,801 million, compared with $12,839 million reported in 2022-end.

The company’s board of directors announced a dividend payout of 55 cents per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership in the second quarter of 2023. The dividend is payable on Oct 4, 2023, to shareholders of record at the close of business as of Sep 20, 2023.

Zacks Rank & Key Picks

Restaurant Brands carries a Zacks Rank #3 (Hold).

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