Here’s What We Are Watching For In Restaurant Brands International’s Q2 2017 Earnings

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Restaurant Brands

Restaurant Brands International (RBI) (NYSE: QSR) will announce its Q2 2017 results on August 2nd 2017 and this will be the first quarter when the company will report revenues from its latest acquisition Popeye’s Louisiana Kitchen (PLK). Analysts expect the company’s EPS (earnings per share) for this quarter to be slightly higher than the same period last year and a nearly 10% year on year revenue growth.

Below is a summary of consensus estimates for Restaurant Brands for Q2 2017:

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Source: Yahoo Finance

The company’s stock price has gained around 8% between April and June 2017, however franchisee issues for its Tim Hortons segment have impacted the company negatively and delayed its key technology initiatives. (Read Here’s Why Restaurant Brands International Needs To Focus On Tim Hortons Franchisee Partners). The company’s aggressive cost cutting measures impacting the margins of franchisees have not gone down well with the franchisee association. This has delayed the launch of its mobile order and pay system and unhappy franchisees can impact customer satisfaction. We will be watching the impact of this tussle on the company’s results and if there are any concrete measures announced for a resolution. (Read Can A New Tim Hortons CEO Resolve RBI’s Challenges?)

Popeye Louisiana Kitchen is likely to become a key revenue driver for RBI and as the company reports sales and profitability of this segment for the first time since its acquisition, we will be closely watching these numbers in the Q2 2017.

RBI appears to be behind peers in introducing “healthier” menu items. Recently the company announced that it will be migrating to antibiotic free chicken by the end of 2018. The company is far behind McDonald’s and KFC in this initiative with McDonald’s looking to move towards fresh beef in its burgers. (Read Here’s Why “Antibiotic Free” Chicken Is A Necessity For Restaurant Brands International).

 

Industry Environment

As per data analyzed by BlackBox Intelligence, the restaurant industry has been “cautiously optimistic” in Q2 2017. While comp sales and traffic growth have remained negative throughout the quarter, June sales were best for the industry for both these metrics in the past six months.

Higher job and economic growth and moderating credit growth should help the restaurant industry going forward. Fine dining and upscale casual were the best performing restaurant segments in Q2 2017. Fast casual restaurants have been the weakest performing segment and the quick service segment is also struggling to grow. Restaurant Brands International falls in the quick service segment, however its strong management is capable of handling industry headwinds.

Q2 2017 will be an eventful quarter for RBI as it reports earnings from the newly acquired PLK segment and handles issues relating to Tim Hortons’ franchises. We will be watching both these events closely.

 

For more details see our complete analysis for Restaurant Brands International

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