Back to top

Image: Bigstock

What's in Store for Restaurant Brands (QSR) in Q4 Earnings?

Read MoreHide Full Article

Restaurant Brands International Inc. (QSR - Free Report) is scheduled to report fourth-quarter 2017 results on Feb 12, before market opens.

In the last reported quarter, earnings surpassed the Zacks Consensus Estimate by 18.37%. In fact, Restaurant Brands beat earnings in each of the trailing four quarters, the average positive surprise being 9.83%.

The company is known for its various sales boosting efforts that include solid expansion, improved restaurant operations and consistent menu innovation.

Notably, shares of Restaurant Brands have rallied 16.4% in the past year, outperforming the industry’s gain of 12.9%.




Let’s take a look at how the company’s top and bottom lines will shape up in the to-be-reported quarter.

Revenues to Reflect Sales-Building Initiatives

The consensus estimate for fourth-quarter revenues is pegged at $1.26 billion, reflecting 13.2% year-over-year growth. This can be attributed to the company’s efforts to drive traffic and sales.

Product development plays an important part in the company’s sales-building strategy as it is expected to lure greater number of guests and strengthen the company’s brand position in food quality and taste. Notably, Restaurant Brands has unwavering focus on driving traffic and revenues at the Burger King brand through core product platforms, continual focus on a balanced menu design, expansion of delivery business, promotional offerings, efforts to grow breakfast daypart and product launches. Meanwhile, growth in each of its breakfast, lunch and dinner dayparts, supported by new products is driving incremental sales at Tim Hortons restaurants as well.

In addition, Restaurant Brands debuted its TIM’s mobile app — which offers mobile order and pre-pay — in early 2017 and continues to make improvements in it based on feedbacks. The company also aims to continue adopting similar initiatives to drive sales.

Expansion Efforts & Franchising Drive Earnings

Restaurant Brands sees substantial opportunity to grow its brands in existing markets as well as new markets. It continues to expand and speed up development of all the three brands by establishing master franchisees with exclusive development rights as well as joint ventures with new and existing franchisees around the globe.

Given that almost 100% of the company’s current system-wide restaurants are franchised, its expenses are considerably low. Since the company signs franchise agreements for all the restaurants, the cost burden gets shifted. The reduced capital investment thus facilitates earnings growth.

We note that the consensus estimate for fourth-quarter earnings is pegged at 57 cents, mirroring 29.6% year-over-year growth.

Additionally, due to a franchised business model, free cash flow continues to grow, allowing reinvestment for increasing brand recognition and shareholders’ return.

Our Quantitative Model Does Not Predict a Beat

Restaurant Brands does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

Zacks ESP: The company has an Earnings ESP of -7.56%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Restaurant Brands has a Zacks Rank #3.

Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Restaurant Brands International Inc. Price and EPS Surprise

 

 

Stocks to Consider

Here are a few stocks from the restaurant space that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Cracker Barrel Old Country Store (CBRL - Free Report) has an Earnings ESP of +0.57 and a Zacks Rank #2 (Buy). The company is scheduled to report its quarterly numbers on Feb 20. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cheesecake Factory (CAKE - Free Report) has an Earnings ESP of +0.17% and a Zacks Rank #3. The company is slated to report its quarterly numbers on Feb 21.

Fogo de Chao has an Earnings ESP of +5.63% and a Zacks Rank #3. The company is expected to release its quarterly numbers on Mar 13.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>

Published in