Restaurant Brands International Reports Another Profitable Quarter, Even As Peers Struggle

Reporting its quarterly earnings before the market opened on 24th October 2016, Restaurant Brands International (NYSE: QSR) witnessed a rise in both its revenues (+5% y-o-y) and earnings per share (+34% y-o-y). While the increase in revenues was supported by the growth seen at Tim Hortons, earnings were driven by the continued fiscal discipline practiced by the management of the company. However, the company’s stock price was seen tumbling due to the lackluster growth in comparable sales as compared to same quarter last year. We feel that this is likely an over-reaction from investors, and the stock will rebound.

The growth in the top line at RBI primarily came from Tim Hortons (+7% y-o-y), although Burger King (+1% y-o-y) also saw its revenues increase. This is noteworthy, given the sustained drop in revenue at both McDonald’s and Dunkin’ Donuts. Talking first about TH, the growth was facilitated by the expansion of the chain’s footprint in Canada and the launch of new products like Shawarma and Falafel Wraps. To keep up with its expansion strategy, the company announced  a master franchise joint venture for TH in Great Britain. It hopes to see even greater growth come from international markets, which in the September quarter saw an 8.4% y-o-y increase in comps.

Burger King, despite turmoil in the QSR segment, particularly in the U.S., witnessed a 1.7% y-o-y increase in comps, translating into revenue growth. The primary regions contributing towards the comps were Asia Pacific, Caribbean, and Latin America, slightly offset by softness in the U.S. and Canada. Further, Burger King continued restaurant expansion, with the number of outlets growing at an impressive pace of 4% in the quarter, driven by Korea, China, and the master franchise joint venture in Brazil. Going forward, it expects to continue restaurant expansion, while showcasing product innovation through launches like Bacon King planned for the fourth quarter.

Furthermore, famous for its strict fiscal discipline, 3G Capital, didn’t disappoint on the cost side. Although the cost of sales were up slightly, the drop in SG&A expenses helped keep operating costs on a tight rope. This, in turn, translated into a 5 percentage point increase in the company’s operating margin, which was up 7.1 percentage points to 40%. All in all, the company had a much better quarter than its nearest competitor McDonald’s, despite the negative sentiment around it.

Have more questions on Restaurant Brands International (NYSE: QSR)? See the links below:

• Can Tim Hortons Challenge Starbucks’ And Dunkin’ Brands’ Duopoly In The U.S.?
• Why Have We Revised Our Price Estimate Of Restaurant Brand International Upwards To $42 Per Share?
• Restaurant Brands International Stays Confident Amid Tepid Q2’16 Sales And Fears Of Restaurant Industry Slump
• Restaurant Brands International Q2 FY’16 Earnings Preview: Emphasis On Expansion To Be The Growth Strategy
• Franchised Restaurants To Contribute More Revenues Than That Of Company-Operated Restaurants For Restaurant Brands International By The Next 3 Years
• How Has Restaurant Brands International’s Revenue And EBITDA Composition Changed Over 2011-2015?
• By What Percentage Have Restaurant Brands International’s Revenues And EBITDA Grown Over The Last Five Years?
• Where Will Restaurant Brands International’s Revenue And EBITDA Growth Come From Over The Next Three Years?
• Restaurant Brands International Q1 FY’16 Earnings Preview: Breakfast Market To Drive Comp Sales
• What Is Restaurant Brands International’s Revenue & EBITDA Breakdown? (Updated After Q1 2016)
• What’s Restaurant Brands International’s Fundamental Value Based On Expected 2016 Results?

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