Restaurant Brands (QSR) Q3 Earnings & Revenues Lag Estimates

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Restaurant Brands International, Inc. QSR reported lower-than-expected results in the third-quarter 2018. Earnings missed the Zacks Consensus Estimate after beats in the last 14 quarters, revenues missed for the second straight quarter. Following the quarterly results, shares of the company decreased more than 1%. In a year's time, the stock has lost 11.7% against the industry 's 10.9% rally.

Adjusted earnings of 63 cents per share missed the consensus mark by a couple of cents. However, the reported figure increased 8.6% from the year-ago quarter number. This uptick can be primarily attributable to a consistent improvement in the company's top line along with the recovery of preferred shares in December 2017.

Total revenues came in at $1,375.3 million, which fell short of the consensus estimate by 1.1%. Revenues, however, improved 13.8% from the year-ago quarter figure, courtesy of increased system-wide sales across the company's brands.

Segmental Revenues

Restaurant Brands operates through three segments - Tim Hortons, Burger King and Popeye's Louisiana Kitchen.

Revenues at Tim Hortons totaled $853.9 million compared with $827 million in the prior-year quarter. Rise in franchise and property revenues led to revenue growth. System-wide sales increased 2.8% on the back of net restaurant growth. Comps at this segment grew 0.6% compared with 0.3% gain in the prior-year quarter and flat in the last reported quarter.

Burger King 's revenues increased from $416.4 million in third-quarter 2017 to $313.6 million in the quarter under review, mainly driven by increased franchise and property revenues. System-wide sales rose 7.8%, lower than 11.2% growth in the year-ago comparable period and an 8.4% increase in the last reported quarter. System-wide sales growth can be attributed to net restaurant growth of 6.1% and positive comps growth.

Comps grew 1% in the quarter under review compared with a 3.6% increase in the prior-year quarter and a 1.8% increase in the last reported quarter. Soft U.S. comparable sales led to the comps decline.

Popeye's Louisiana Kitchen , which was acquired on Mar 27, 2017, reported revenues of $105 million in the quarter under review compared with $68 million in the year-ago quarter.

System-wide sales rose 7.9% owing to net restaurant growth of 7.6% and comps growth of 0.5%. System wide sales growth compared favorably with prior-year quarter's 4.5% increase. However, comparable sales compared unfavorably with the prior-year quarter's 10.7% gain.

Operating Performance

Per the Previous Accounting Standard, the company's adjusted EBITDA rose 5.5% on an organic basis, driven by system-wide sales growth. Segment wise, Tim Horton's EBITDA rose 3.7%, organically. On an organic basis, Burger King's EBITDA grew 5.1% year over year. Popeye's EBITDA was up 20.9%, organically.

Restaurant Brands International Inc. Price, Consensus and EPS Surprise

Restaurant Brands International Inc. Price, Consensus and EPS Surprise | Restaurant Brands International Inc. Quote

Cash and Capital

Restaurant Brands exited the quarter with cash and cash equivalent balance of $1,143.5 million, under the new accounting standard. As of Sep 30, 2018, total debt was $12.2 billion. The company's board of directors declared a dividend of 45 cents per share for the fourth quarter of 2018, which is payable Jan 4 to its shareholders of record at the close of business as of Dec 17.

Restaurant Brands carries a Zacks Rank #3 (Hold).

Key Picks

Better-ranked stocks in the same space include BJ's Restaurants, Inc. BJRI , Dave & Buster's Entertainment, Inc. PLAY and Darden Restaurants, Inc. DRI . BJ's Restaurants and Dine Brands Global sport a Zacks Rank #1 (Strong Buy), whereas Dine Brands has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

BJ's Restaurants has an impressive long-term earnings growth rate of 15.3%.

Dave & Buster's Entertainment delivered positive earnings surprise in each of the trailing four quarters, with an average of 13.7%.

Darden Restaurants reported better-than-expected earnings over the preceding four quarters, with an average of 5.1%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: QSR , PLAY , BJRI , DRI

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