Burger King Worldwide Inc.
) third-quarter adjusted earnings per share of 23 cents beat the
Zacks Consensus Estimate of 21 cents by 9.5% and increased 35.3%
year over year. Increased adjusted earnings before interest,
taxes, depreciation and amortization (EBITDA) and lower company
restaurant expenses contributed to the earnings growth.
Revenues & Margins
Burger King's total revenue dropped 39.6% year over year to
$275.1 million due to the adverse impact of refranchising, lower
company restaurant sales and sluggish comparable sales (comps).
However, quarterly revenues beat the Zacks Consensus Estimate of
$266.0 million by 3.4%. Organically (excluding the impact of
refranchising and currency), revenues were up 8% in the quarter
thanks to net restaurant growth and positive comps at Europe,
Middle East and Africa (EMEA), Latin America and the Caribbean
(LAC) and Asia Pacific (APAC) regions.
Organic adjusted EBITDA grew 16.7% year over year to $176
million with solid EBITDA growth across North America, EMEA and
APAC and lower general and administrative expense (G&A).
Adjusted EBITDA margins were 64%, significantly higher than the
year-ago level of 35.7%, driven by refranchising efforts and cost
Food, paper and product costs as well as occupancy and other
operating costs ratio were considerably lower in the quarter.
Overall comps in the quarter nudged up 0.9% but were lower
than the year-ago quarter's comps of 1.4% owing to a 0.3% decline
in the comps at U.S. & Canada. Comps grew a respective 2.4%,
2.1% and 3.7% in EMEA, LAC and APAC. The APAC region performed
better in the quarter as against negative comps of 2.2% in the
A still-anemic macroeconomic environment and stiff competition
led to the decline in
U.S. & Canada
comps. However, Burger King remains steadfast in executing its
Four Pillars strategy in this region that includes menu
improvements, marketing initiatives, operational efficiency and
re-imaging in U.S. & Canada.
The success of the "Trial Weeks" value promotion in Germany,
and EUROKING(TM) as well as KING AHORRO value promotions and the
couponing initiatives in Spain facilitated comps growth in the
region posted positive comps in the third quarter gaining from
solid traffic growth in Brazil offsetting the poor performance in
Puerto Rico and Mexico. The company's advertising activities
boost sales in Brazil. In an attempt to resist the downfall in
comps, management has altered the menu and has undertaken
promotional strategies in Puerto Rico to increase traffic
region, Australia continues to be the star performer. China and
Korea are also better-positioned in the quarter benefiting from
the company's value promotions and menu improvement
Refranchising & Re-imaging
During the third quarter of 2013, Burger King refranchised 19
units in Spain bringing the refranchising initiative to an end.
Burger King seeks to re-image at least 40% of its U.S. &
Canada restaurants by 2015.
Even though Burger King posted higher earnings in the quarter,
its revenues are declining continuously for the past few quarters
mostly due to the fragile U.S. economy. Government budget cuts,
high tax rates and still-tightened credit availability continue
to hurt consumers' discretionary spending. Also, weak economic
conditions in Europe remain a headwind.
Other Stocks to Consider
Burger King currently carries a Zacks Rank #4 (Sell). Some
other players in the restaurant industry which look attractive at
the current level include
Red Robin Gourmet Burgers Inc.
Cracker Barrel Old Country Store, Inc.
Bob Evans Farms, Inc.
). While Red Robin holds a Zacks Rank #1 (Strong Buy), Cracker
Barrel and Bob Evans Farms carry a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
BOB EVANS FARMS (BOBE): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
RED ROBIN GOURM (RRGB): Free Stock Analysis
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