x
Investment Opportunities

Restaurant Brands International Fourth Quarter Earnings Review

Restaurant Brands International (NYSE: QSR) reported earnings on February 10, topping analysts’ expectations. As a result, Restaurant Brands International stock popped up briefly from its $63.84 February 7 close to $65.91 at 10 a.m. before dropping back down to trade around $64 in the late morning.

It closed on the day at $65.68 and opened today at $65.80.

Restaurant Brands International Fourth Quarter Results

The company reported quarterly sales growth of 9.9% in the fourth quarter of 2019. This was largely driven by 42% growth in sales from subsidiary restaurant unit Popeyes. The popularity of its previously viral new chicken sandwich was a major driver of this growth.

While analysts expected revenue for the fourth quarter to come in at about $1.46 billion, Restaurant Brands beat that expectation with a quarterly revenue of $1.48 billion. Adjusted earnings per share for the quarter was $0.75, beating expectations by $0.02 per share.

Over the past year, Restaurant Brands essentially remained flatlined at about $64. Could beating earnings expectations be the jump the stock needed for a better year ahead? Perhaps.

Over the past month, Restaurant Brands International stock has increased modestly. It closed at $62.48 on January 10 and at $63.86 on February 7. That’s a monthly gain of 2.21%.

The company’s price-to-earnings ratio is currently around 18.5 and the stock’s dividend yields about 2.8%.

The Popeyes Chicken Sandwich

Last year, Popeyes introduced a new chicken sandwich that benefited from viral conversations on social media. I wrote about the chicken product extensively last November.

November was when the chicken sandwich returned to the restaurant chain’s menus after the company had run out of the product in August. That’s when the product initially went viral.

The chicken sandwich “has proven to be a game-changer for the brand in every way,” according to CEO Jose Cil in a statement

And you can see it in Restaurant Brands International’s financials. 

Popeyes’ same-store sales increased 34.4% in the fourth quarter. Analysts had only expected about a 14% to 15% gain.

And adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $622 million versus $581 million a year ago. The company handily beat the $611 million consensus expectation.

More to Restaurant Brands International’s Stock than Chicken Sandwiches

But there’s more to Restaurant Brands International’s stock than Popeyes chicken sandwiches and that needs to be accounted for. And the news is not all great.

On the one hand, hamburger legend Burger King is having success with its plant-based Impossible Whopper. And the company has plans to expand its Impossible “meat” lines further later on this year. 

But the meat-alternative fast-food space will be increasingly competitive as companies like McDonald’s and Wendy’s introduce their own assortment of vegetarian “meat” offerings.

And the Canada-based Tim Hortons coffee and donut chain has been a lag for the Restaurant Brands stock. This is, in part, because its lunch offerings have been weak sellers. In addition, its cold coffees have not been a tremendous success either.

Further, the coronavirus outbreak hysteria has meant that plans to grow Popeyes and Tim Hortons in the Chinese market may need to be postponed. Both McDonald’s and Yum China Holdings have been closing China locations. We do not know to what extent there will be a coronavirus fallout. 

Invest in Restaurant Brands International in 2020?

Restaurant Brands International is a Canadian fast-food holding company, with a portfolio of three major fast-food brands. The company formed in 2014 when Burger King merged with Tim Hortons in a $12.5 billion deal.

The company then purchased Popeyes in 2017. 

Restaurant Brands International is the fifth largest global fast-foods operator. Topping the list is Subway, the largest, with McDonald’s, Starbucks  and Yum! Brands behind them. Yum! Brands is a similar holding company that includes Pizza Hut, Taco Bell and KFC.

Restaurant Brands International is based in Toronto, but two of its restaurants, Popeyes and Burger King, are based in Miami.

Compared with the overall S&P 500, Restaurant Brands was a very weak investment over the past year. The S&P gained 21% while Restaurant Brands essentially treaded water.

Will Restaurant Brands International stock be delicious in 2020? That remains to be seen. Keep your eye on the stock and always be sure to do your homework before you decide to take a shot and invest.

For more information about the latest earnings reports and how they affect individual stocks like Restaurant Brands International, sign up for our free e-letter below. Our Investment U experts provide daily tips to help you find the best investment opportunities in the market.


About

Brian M. Reiser has a Bachelor of Science degree in Management with a concentration in finance from the School of Management at Binghamton University.

He also holds a B.A. in philosophy from Columbia University and an M.A. in philosophy from the University of South Florida.

His primary interests at Investment U include personal finance, debt, tech stocks and more.

Articles by
Related Articles