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May 24, 2024 |
Restaurant Brands International Inc. (NYSE: QSR)$67.22 USD ( As of 05/23/24 ) |
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Data Overview
| 52 Week High-Low | $82.75 - $62.67 |
|---|---|
| 20 Day Average Volume | 2,070,797 |
| Beta | 0.92 |
| Market Cap | 21.27 B |
| Dividend / Div Yld | $2.32 / 3.45% |
| Industry | Retail - Restaurants |
| Industry Rank | 155 / 249 (Bottom 38%) |
| Current Ratio | 1.08 |
| Debt/Capital | 73.10% |
| Net Margin | 17.17% |
| Price/Book (P/B) | 4.40 |
| Price/Cash Flow (P/CF) | 12.37 |
| Earnings Yield | 4.97% |
| Debt/Equity | 2.72 |
| Value Score |  |
|---|---|
| P/E (F1) | 20.11 |
| P/E (F1) Rel to Industry | -14.03 |
| PEG Ratio | 2.07 |
| P/S (F1) | 2.97 |
| P/S (TTM) | 2.97 |
| P/CFO | 12.37 |
| P/CFO Rel to Industry | 0.47 |
| EV/EBITDA Annual | 14.81 |
| Growth Score |  |
|---|---|
| Proj. EPS Growth (F1/F0) | 3.18% |
| Hist. EPS Growth (Q0/Q-1) | 7.89% |
| Qtr CFO Growth | -53.01 |
| 2 Yr CFO Growth | 88.31 |
| Return on Equity (ROE) | 31.12% |
| (NI - CFO) / Total Assets | -12.66 |
| Asset Turnover | 0.31 |
| Momentum Score |  |
|---|---|
| 1 week Volume change | 6.66% |
| 1 week Price Cng Rel to Industry | -6.12% |
| (F1) EPS Est 1 week change | 0.03% |
| (F1) EPS Est 4 week change | -1.16% |
| (F1) EPS Est 12 week change | -0.88% |
| (Q1) EPS Est 1 week change | 0.18% |
Summary
Restaurant Brands’ shares have outpaced its industry over the past year. Moreover, current-quarter and year earnings estimates have gone up over the past two months, reflecting analysts’ optimism surrounding the stock. Various sales-boosting initiatives like improving services, reimaging restaurants, menu innovation along with continued expansion should drive the top line. In fact, the company believes that there is opportunity to grow both the Tim Hortons and Burger King brands across the world. The acquisition of Popeye’s also bodes well as it adds a solid brand to its portfolio, which should further ramp up unit growth and aid in reducing costs. The company aims to continue focusing on guest satisfaction and franchisee profitability. However, rising costs along with negative currency translation might dent the company’s profitability, while a soft consumer spending environment could keep comps under pressure.
Elements of the Zacks Rank
Agreement Estimate Revisions (60 days)
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63% Q1 (Current Qtr)Revisions: 8 Up: 3 Down: 5 |
71% Q2 (Next Qtr)Revisions: 7 Up: 2 Down: 5 |
56% F1 (Current Year)Revisions: 9 Up: 4 Down: 5 |
63% F2 (Next Year)Revisions: 8 Up: 3 Down: 5 |
Magnitude Consensus Estimate Trend (60 days)
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Upside Zacks Consensus Estimate vs. Most Accurate Estimate
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Surprise Reported Earnings History
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Average 4 Qtr Surprise |
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The data on the front page and all the charts in the report represent market data as of 05/23/24, while the report's text is as of 12/26/2017
Overview
Based in Canada, Restaurant Brands International Inc. or RBI (QSR) is one of the world's largest quick service restaurant companies.
Formed on Aug 25, 2014, the company came into existence with the merger of Canadian coffee shop and restaurant chain – Tim Hortons Inc. – and American fast food restaurant chain –Burger King Worldwide Inc. It is now the parent company to these two iconic quick-service restaurant brands. On Mar 27, 2017, Restaurant Brands acquired quick service restaurant chain, Popeyes Louisiana Kitchen, for $79.00 per share in cash, or $1.8 billion.
These independently-operated brands have been serving their respective customers, franchisees and communities customers for more than 40 years and have similar franchise business models with complementary daypart mixes.
Restaurant Brands has three operating and reportable segments: Tim Hortons, Burger King and Popeye’s Louisiana Kitchen. As of Sep 30, 2017, the company owned or franchised over 23,700 restaurants in more than 100 countries and the U.S. territories.
While the Tim Hortons brand maintains a strong base of restaurants across Canada, the United States and the Middle East; Burger King mostly serves customers in the United States and in markets outside. Popeye’s Louisiana Kitchen operates restaurants in the United States and 25 other countries.
Restaurant Brands generates revenues from four primary sources: (i) sales to franchisees associated with the company’s supply chain operations, including manufacturing, procurement, warehousing and distribution, as well as sales to retailers; (ii) franchise revenues, consisting mainly of royalties based on a percentage of sales reported by franchise restaurants and franchise fees paid by franchisees; (iii) property revenues from properties it leases or subleases to franchisees; and (iv) sales at company-owned restaurants.
Reasons To Buy:
Various sales-boosting initiatives undertaken by the company coupled with its solid expansion efforts should drive growth
Stock Price Movement: Restaurant Brands’ shares have rallied 28.3% year to date, outpacing the industry’s gain of 14.1%. The company’s earnings also surpassed the Zacks Consensus Estimate consistently over the past 11 quarters. Meanwhile, current-year earnings estimates have moved up, in the past two months. Going ahead, the company’s solid expansion efforts along with the recent Popeyes acquisition are likely to help the stock maintain its solid performance.
Popeyes Louisiana Kitchen Acquisition: In Feb 2017, Restaurant Brands inked a definitive agreement to acquire Popeyes Louisiana Kitchen for $79.00 per share in cash, or $1.8 billion. The transaction was closed on Mar 27, 2017, upon completion of the customary closing conditions.
Popeyes is one of the largest quick service restaurant chicken concepts in the world with over 2,800 restaurants in the United States and 25 other countries. Its global footprint thus complement’s Restaurant Brands’ legacy portfolio of nearly 21,000 restaurants worldwide.
Building on the momentum of recent years, Restaurant Brands plans to carry on developing the brand at an increasing pace in the United States and international markets. The acquisition of Popeyes has thus added a booming, highly-regarded brand to Restaurant Brands that has a distinctive position within a compelling segment along with strong customer loyalty and riveting prospects for growth in the United States and internationally. The acquisition is thus likely to lead to accelerated global unit development and also aid in cutting costs, thereby proving accretive to earnings.
Leveraging the Power of Three Strong Brands: All the brands of the company operate in the quick service restaurant (“QSR”) segment – the largest in the restaurant industry of the United States and Canada. The segment has demonstrated growth over a long period of time.
Tim Hortons is one of the largest restaurant chains in North America and the largest in Canada and is known for its coffee and donuts. Meanwhile, Burger King restaurants appeal to a wide spectrum of consumers, with multiple dayparts and product platforms appealing to diverse customer groups. With over 60 years of operating history, Burger King has developed a scalable and cost-efficient QSR hamburger restaurant model that provides guests fast and delicious food. Popeyes too is one of the leading quick service restaurant chicken concepts in the world. The company is making good progress in integrating the brand and continues to be excited about its long-term growth potential.
Going forward, the company remains focused on growing franchisee profitability by leveraging on its global scale and believes that it has the potential to become the most competent franchised QSR operator in the world.
Solid Expansion Efforts: The company believes that there is an attractive opportunity to grow all its brands around the world by expanding its presence in existing markets as well as entering new markets. It continues to evaluate opportunities to speed up international development of all the three brands by establishing master franchisees with exclusive development rights as well as joint ventures with new and existing franchisees.
The company is encouraged by the long-term growth prospects of the Tim Hortons brand and remains committed to deliver on its international growth strategy of expanding the brand around the world. In this regard, the company recently formed master franchise joint venture partnerships (MFJVs) for the development of the brand in Mexico, Spain, Great Britain and the Philippines. Going forward, the company believes that continued expansion in the Middle East, combined with growth in the newly formed MFJV markets (Asia, Europe and Latin America) will allow the company to accelerate the pace of restaurant growth, internationally.
Moreover, the company is optimistic about the major expansion opportunity that lies ahead for the brand in the United States. The regions where the company has signed development agreements include Cincinnati, Columbus, Indianapolis, Minneapolis, Cleveland and Youngstown.
As part of its international growth strategy for Burger King, the company has created strategic master franchise joint ventures in various markets across Europe, the Middle East and Africa (“EMEA”), Asia Pacific (“APAC”) and Latin America and the Caribbean (“LAC”) and received a meaningful minority equity stake in each joint venture. It has also entered into master franchise and development agreements in a number of markets across these regions, including Japan, France, Russia, Brazil, Spain, Belgium, China, Turkey and Korea. The company believes that it has further growth opportunities to be realized in 2017 and beyond in those regions and other regions as well. Also, in the first quarter of 2017, Restaurant Brands inked a multi-country development agreement in sub-Saharan Africa, which is believed to be a high-potential consumer market. Burger King also opened its 100th store in India recently, with the region proving to be a great growth center in a short span.
Additionally, the company has signed a number of development agreements for the Burger King brand in the United States, each of which will stimulate further opening and remodels in the country for many years to come.
Meanwhile, the company also continues to expand the Popeyes brand globally with particular strength in United States, Turkey and Canada. Notably, it recently opened its first restaurant in South Africa, and the initial feedback and sales performance has been impressive.
Efforts to Boost Sales: The company continues to focus on improving its level of service through comprehensive training, improved restaurant operations, reimaging efforts and attractive menu options to enhance overall guest satisfaction and thereby drive comps.
Restaurant Brands believes that new product development is a key driver of long-term success for its brands and will continue to be in focus in 2017 and beyond. This is expected to drive traffic by expanding the customer base, spreading out into new dayparts, and continuing to build brand leadership in food quality and taste.
The company has unwavering focus on its goal to drive 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. The company also continues to make progress in re-imaging Burger King restaurants in the United States, which is expected to augment guests’ experience and invigorate the brand’s potential.
Meanwhile, growth across each of its breakfast, lunch and dinner dayparts, supported by new products is driving incremental sales at Tim Hortons restaurants. Its coffee, cold beverage, wraps and breakfast sandwich platforms, particularly, continues to reflect strength. In the first quarter of 2017, the company launched espresso-based beverages in all Tim Hortons restaurants across Canada. The company expects this platform to continue growing given the meaningful innovation its can introduce around its base products.
In addition, the company debuted its TIM’s mobile app — which encompasses mobile order and pre-pay — in early 2017 and continues to make improvements in it based on feedbacks. Going forward, Restaurants Brand aims to continue pursuing similar exciting initiatives, to drive the brands’ sales growth.
Franchised Model Safeguards Earnings: 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 instead of operating them itself, this puts the cost burden on the franchisees which operate the businesses. The reduced capital requirements thus facilitate earnings growth and ROE expansion. Alongside, free cash flow continues to grow, allowing reinvestment for increasing brand recognition and shareholders’ return.
The fully franchised business model also allows the company to use other people's money to expand the brand more rapidly into various markets.
Risks
- Valuation Looks Irrational: As Restaurant Brands has significantly outperformed the industry since its IPO in Dec 2014, its valuation looks a bit stretched when compared with the industry average. Looking at the company’s price-to-earnings (P/E) ratio, which is one of the most commonly used valuation ratio and is best suited for evaluating restaurants, investors might not want to pay any further premium. Currently, the company has a trailing 12-month P/E ratio of 32.4, which is relatively overvalued right now compared with its peers as the industry average PE is 27.2x.
- Macro Economic Pressure: Lingering uncertainties in various international markets where it operates is a major cause of concern for the company. Continued softness in Western Canada is likely to impact sales growth at Tim Hortons, which has a majority of its base in the region. Also, sales at Tim Hortons restaurants based in the Middle East might get affected by the political unrest and lower government spending affecting the region’s economy. Korea and Australia have proven to be soft spots too of late. Meanwhile, over the past few quarters, the U.S. restaurant space has not been too enticing for investors. Despite economic growth, somewhat lower energy prices and higher income, consumers increased their spending only modestly on dining out, which resulted in low consumption over the past few quarters. This is because, along with wage growth, inflation is also on the rise, which translates to lower real income and thus less disposable income. The situation has taken a worse turn, thanks to higher health care costs and tightened credit availability in the U.S. Moreover, as consumers demand high-quality products at lower prices, it is pushing grocery stores to decrease their food prices in order to remain competitive. This is resulting in a bigger gap between food-at-home and food-away-from-home indices.Thus, same-store sales growth has been dull in a difficult sales environment. Traffic too has been weak. As a result, the company’s sales have come under pressure. In fact, the third quarter of 2017 marked the seventh consecutive quarter of negative comp sales for the restaurant industry as a whole, thereby continuing the somber mood.Additionally, softness in certain product categories is hampering comps growth at Tim Hortons' while increased competitive pressure is leading to comps decline at Popeyes.
- Cost Issues & Currency Headwinds: Notably, costs related to various sales boosting initiatives are expected to impact margins. Thus, the company’s profitability in the upcoming quarters might somewhat be under pressure despite the continued cost discipline.
Meanwhile, negative currency translation is a concern for Restaurant Brands. The company has considerable international presence and is therefore highly vulnerable to fluctuations in exchange rates. Strengthening of the dollar against various other currencies is likely to continue to hurt the company’s revenues. In fact, Tim Hortons realizes much of its business from Canada. Thus, any fluctuation in the Canadian dollar with respect to the U.S. dollar impacts the company’s revenues greatly.
- Fully-Franchised Model: The company’s fully-franchised model sure has a lot of positives but has also got its share of drawbacks and risks. Under this business model, the company’s prospects depend on its ability to attract new franchisees for all its brands and the willingness of franchisees to open restaurants in existing and new markets. The company also has limited influence over franchisees as a result of which its ability to control restaurants’ operations and implement operational initiatives and business strategies is restricted.
Last Earnings Report
Quarter Ending 03/2024
| Report Date | Apr 30, 2024 |
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| Sales Surprise | 1.40% |
| EPS Surprise | 1.39% |
| Quarterly EPS | 0.73 |
| Annual EPS (TTM) | 3.23 |
Restaurant Brands Q3 Earnings Beat on Higher Revenues
Restaurant Brands reported an earnings and revenue beat in the third quarter of 2017.
Earnings and Revenue Discussion
Adjusted earnings of 58 cents per share surpassed the Zacks Consensus Estimate of 49 cents by 18.4% and rose 34.9% year over year on higher revenues, partly offset by increased expenses.
Revenues of $ 1.21 billion increased 12.4% year over year primarily owing to the inclusion of Popeye’s Louisiana Kitchen’s results as well as higher system-wide sales at both the Tim Hortons and the Burger King segments. Revenues also beat the consensus mark of $1.19 billion.
Inside the Headline Numbers
Restaurant Brands operates through three segments – Tim Hortons, Burger King and Popeye’s Louisiana Kitchen.
Tim Hortons: Tim Hortons reported revenues of $827 million, reflecting a rise of 4.7% over the prior-year quarter, primarily owing to system-wide sales growth.
System-wide sales increased 3% on the back of net restaurant growth. The rise however lagged 4.8% growth of the year-ago period but was higher than 2.6% posted last quarter.
Comps at this segment increased 0.3% in the quarter versus 2% growth in the prior-year quarter and 0.8% decline in the preceding quarter. Comps were primarily driven by 0.6% growth in Canada.
Burger King: Burger King’s revenues were up 9.7% from the prior-year quarter to $313.6 million, mainly on the back of system-wide sales growth.
System-wide sales rose 11.2%, higher than 7% growth recorded in the year-ago comparable period, and 10.6% increase recorded in the preceding quarter. System-wide sales growth was attributable to net restaurant growth of 6.6% and positive comps growth.
Comps at the Burger King division grew 3.6% in the quarter under review versus 1.7% growth in the prior-year quarter and 3.9% growth quarter. The upside was driven by U.S. comps growth of 4%.
Popeye’s Louisiana Kitchen: Total revenues in this segment amounted to $68 million. System-wide sales rose 4.5% owing to net restaurant growth of 5.9%, partially offset by declining comps.
Notably, comps at this division declined 1.8%, comparing favorably with a 2.7% decline in the last quarter. The decline was caused by a 2.6% decrease in U.S. comps.
Industry Analysis(1)Zacks Industry Rank: NA
Top Peers
| Yum! Brands, Inc. (YUM) |
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| Bloomin' Brands, Inc. (BLMN) |
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| Texas Roadhouse, Inc. (TXRH) |
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| Domino's Pizza Inc (DPZ) |
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| Arcos Dorados Holdings Inc. (ARCO) |
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| Chipotle Mexican Grill, Inc. (CMG) |
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| Brinker International, Inc. (EAT) |
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| SSP Group (SSPPF) |
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| Darden Restaurants, Inc. (DRI) |
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Industry Comparison Retail - Restaurants | Position in Industry: 9 of 40 |
Industry Peers |
| QSR |
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|---|---|
| Market Cap | 21.27 B |
| # of Analysts | 9 |
| Dividend Yield | 3.45% |
| Value Score | |
| Cash/Price | 0.05 |
| EV/EBITDA | 14.81 |
| PEG Ratio | 2.07 |
| Price/Book (P/B) | 4.40 |
| Price/Cash Flow (P/CF) | 12.37 |
| P/E (F1) | 20.11 |
| Price/Sales (P/S) | 2.97 |
| Earnings Yield | 4.97% |
| Debt/Equity | 2.72 |
| Cash Flow ($/share) | 5.43 |
| Growth Score | |
| Hist. EPS Growth (3-5 yrs) | 7.89% |
| Proj. EPS Growth (F1/F0) | 3.18% |
| Curr. Cash Flow Growth | 3.03% |
| Hist. Cash Flow Growth (3-5 yrs) | 3.19% |
| Current Ratio | 1.08 |
| Debt/Capital | 73.10% |
| Net Margin | 17.17% |
| Return on Equity | 31.12% |
| Sales/Assets | 0.31 |
| Proj. Sales Growth (F1/F0) | 17.93% |
| Momentum Score | |
| Daily Price Chg | -1.58% |
| 1 Week Price Chg | -6.12% |
| 4 Week Price Chg | -8.01% |
| 12 Week Price Chg | -13.43% |
| 52 Week Price Chg | -7.19% |
| 20 Day Average Volume | 2,070,797 |
| (F1) EPS Est Wkly Chg | 0.12% |
| (F1) EPS Est Mthly Chg | -1.16% |
| (F1) EPS Est Qtrly Chg | -0.89% |
| (Q1) EPS Est Mthly Chg | -1.09% |
| X Industry | S&P 500 |
|---|---|
| 1.03 B | 34.84 B |
| 6 | 18 |
| 0.00% | 1.58% |
| - | - |
| 0.05 | 0.04 |
| 10.31 | 14.66 |
| 1.79 | 2.16 |
| 2.70 | 3.41 |
| 10.07 | 13.78 |
| 19.00 | 18.13 |
| 0.83 | 2.73 |
| 4.84% | 5.47% |
| 0.15 | 0.62 |
| 2.76 | 8.64 |
| - | - |
| 11.47% | 9.87% |
| 9.12% | 7.54% |
| 11.37% | 3.44% |
| 5.43% | 6.81% |
| 0.66 | 1.21 |
| 30.52% | 39.29% |
| 3.24% | 11.95% |
| 3.24% | 16.63% |
| 0.97 | 0.54 |
| 3.22% | 4.09% |
| - | - |
| -1.49% | -0.74% |
| -0.39% | -0.55% |
| -3.42% | 4.35% |
| -9.57% | 3.37% |
| -7.19% | 26.90% |
| 262,289 | 2,094,618 |
| 0.00% | 0.00% |
| -0.44% | 0.16% |
| -1.52% | 0.26% |
| -1.80% | -0.14% |
| YUM | BLMN | TXRH |
|---|---|---|
| 38.59 B | 1.82 B | 11.11 B |
| 9 | 7 | 10 |
| 1.96% | 4.56% | 1.47% |
 | | |
| 0.02 | 0.06 | 0.02 |
| 19.75 | 4.86 | 21.43 |
| 2.21 | NA | 1.64 |
| NA | 6.01 | 9.09 |
| 23.59 | 3.76 | 24.26 |
| 24.30 | 8.57 | 27.93 |
| 5.49 | 0.39 | 2.33 |
| 4.12% | 11.68% | 3.58% |
| -1.44 | 3.12 | 0.00 |
| 5.81 | 5.60 | 6.86 |
 | | |
| 11.75% | 20.22% | 35.03% |
| 9.08% | -16.13% | 31.20% |
| 12.00% | 13.03% | 12.53% |
| 6.67% | 5.48% | 12.04% |
| 1.49 | 0.33 | 0.50 |
| NA | 75.71% | 0.00% |
| 22.92% | 1.56% | 6.94% |
| -18.64% | 65.73% | 28.85% |
| 1.15 | 1.38 | 1.79 |
| 8.71% | -2.65% | 14.89% |
| | |
| -1.52% | -2.63% | -0.50% |
| -3.28% | -12.65% | -1.54% |
| -3.21% | -21.93% | 6.06% |
| -1.02% | -22.48% | 11.38% |
| 5.18% | -15.31% | 49.06% |
| 2,133,299 | 1,621,565 | 791,580 |
| 0.00% | 0.00% | 0.00% |
| -1.59% | -3.52% | 3.29% |
| -1.52% | -3.88% | 4.89% |
| -2.60% | -16.70% | 6.97% |
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| Value Score |
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| Growth Score |
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| Momentum Score |
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| VGM Score |
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