Restaurant Brands International Beats Estimates In Q3 2017 But Comparable Sales Growth Disappoints
Restaurant Brands International (RBI) (NYSE: QSR) reported its Q3 2017 results on October 26th and the company reported a revenue growth of around 12.5%, slightly higher than analyst expectations of around 11.7%. However, comparable sales of its Tim Hortons and Popeyes Louisiana Kitchen segments were disappointing, as competition and franchisee troubles in the Tim Hortons segment weigh down the company. Below is a summary of the company’s financial performance and segment-wise performance for this quarter:
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** The company’s reporting of NRG in percentage terms started Q2 2017, hence historical data is not available.
Burger King remains the strongest performing segment for RBI in Q3 2017. Successful promotions and menu innovation such as the new crispy chicken sandwich were the key drivers of revenue for this segment. Burger King is also growing internationally and the company is accelerating the pace of development in India, where its closest competitor, McDonald’s, is facing franchisee issues.
While comparable sales growth in the Tim Hortons Segment remained soft, the company’s espresso-based beverage platform which was rolled out earlier this year is beginning to show results. Coffee and breakfast products are witnessing increasing demand, while growth in the lunch menu remains slow. RBI is confident that post the launch of its mobile order and pay system and improvements in the digital platform based on feedback received, performance of this segment is likely to improve. While the company did not mention the ongoing issue with Tim Hortons franchisees and its impact on sales, we believe these issues might be one of the causes of slower comparable sales growth. However, RBI is engaging Tim Hortons franchisees effectively and the situation should ease up going forward.
The recently acquired Popeyes Louisiana Kitchen continues to face softness in comparable sales growth as the company faces competitive headwinds. The company is focusing on marketing efforts for this segment in 2017 which is likely to drive revenues next year. Further competitively priced products are likely to be the key growth driver for this segment.
Below is a summary of RBI’s expenses for Q3 2017:
We have a $63 price estimate for RBI’s stock, which is near the current market price. We will be updating our model for RBI based on these results which might result in a change in our price estimate for the company.
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