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Restaurant Brands (QSR) Q2 Earnings Top, Sales Lag Estimates

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Restaurant Brands International, Inc. (QSR - Free Report) posted mixed results for the second quarter of 2018, wherein earnings surpassed analysts’ expectations while revenues lagged the same.

Adjusted earnings of 66 cents per share surpassed the Zacks Consensus Estimate of 64 cents by 3.1%. Earnings also increased 29.4% from the year-ago quarter. The growth in earnings is primarily attributable to a continued improvement in the company’s top line along with the recovery of preferred shares in December 2017. Earnings were somehow affected by a higher tax rate when compared with the year-ago period.

Total revenues of $1.34 billion lagged the consensus mark by 2.4%. Revenues, however, increased 18.6% from the year-ago quarter, driven by increased system-wide sales in all of the company’s brands.

Detailed Revenue Discussion by Segments

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

Tim Hortons reported revenues of $823 million compared with $772.3 million in the prior-year quarter. Growth is primarily attributable to greater sales, and franchise and property revenues. System-wide sales increased 5.8% on the back of net restaurant growth. Comps at this segment remained flat in the reported quarter versus 0.8% decrease in the prior-year quarter and 0.3% decline in the last reportedquarter. Comps were affected due to relatively dentedU.S. comparable sales.

Burger King’s revenues were up from $293.7 million in the prior-year quarter to $418.1 million in the second quarter of 2018, mainly on the back of increased franchise and property revenues. System-wide sales rose 8.4%, lower than 10.6% growth in the year-ago comparable period and 11.3% increase in the last reportedquarter. System-wide sales growth can be attributed to net restaurant growth of 6.4% and positive comps growth.

Comps grew 1.8% in the quarter under review versus a 3.9% increase in the prior-year quarter and 3.8% increase in the last reportedquarter. The slump in comps was driven by soft U.S. comparable sales.

Popeye’s Louisiana Kitchen, which was acquired on Mar 27, 2017, reported revenues of $102.3 million in the quarter under review compared with $66.7 million in the year-ago quarter.

System-wide sales rose 10.7%, owing to net restaurant growth of 7.5% and comps growth of 2.9%. System wide sales growth compared favorably with prior-year quarter’s 3.3% increase. Comparable sales also compared favorably with the prior-year quarter’s 2.7% decline.

Restaurant Brands International Inc. Price, Consensus and EPS Surprise

Operating Performance

Per the Previous Accounting Standard, the company’s adjusted EBITDA rose 3.7%, owing to revenue increase at Burger King and Popeye’s, partially offset by a decrease in the supply chain related to Tim Horton revenues. Segment wise, Tim Horton’s EBITDA fell 1%, organically. On an organic basis,Burger King’s EBITDA was up 6% year over year. Popeye’s EBITDA grew 28%, organically.

Cash and Capital

The company exited the quarter with cash and cash equivalent balance of $1 billion under the new accounting standard. Total debt as of Jun 30, 2018,was $12.2 billion. The company’s board of directors has declared a dividend of 45 cents per share for the third quarter of 2018, which is payable on Oct 1 to shareholders of record at the close of business as ofSep 7.

Zacks Rank & Peer Releases

Restaurant Brands currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

McDonald's (MCD - Free Report) reported impressive second-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share of $1.99 surpassed the consensus mark of $1.92 by 3.6% and increased 15% from the year-ago quarter (12% in constant currencies). The upside reflected stronger operating performance.

Darden (DRI - Free Report) reported better-than-expected results in the fourth quarter of fiscal 2018. Adjusted earnings of $1.39 per share outpaced the consensus estimate of $1.35 by 3%. The bottom line also increased 17.8% year over year on the back of higher revenues. Notably, the reported quarter marked the 15th consecutive earnings beat for the company. Darden’s relentless efforts in improving the basic operating factors of the business — food, service and atmosphere — drove the company’s bottom-line performance.

Chipotle (CMG - Free Report) reported better-than-expected results for the second quarter of 2018. Adjusted earnings of $2.87 topped the Zacks Consensus Estimate of $2.78 by 3.2%. The bottom line also grew 23.7% from the year-ago quarter, backed by increased revenues and lower food costs.

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