Markets

Restaurant Brands (QSR) Q3 Earnings: What's In Store?

Restaurant Brands International Inc.QSR is set to report third-quarter 2015 results on Oct 27, before the market opens. This is the fourth quarterly result to be reported by the quick service restaurant company since it began trading in Dec 2014. Last quarter, it posted a positive earnings surprise of 7.41%.

Headquartered in Miami, FL, Restaurant Brands came into existence with the merger of Tim Hortons Inc. and Burger King Worldwide Inc. It is now the parent company of these two iconic quick service restaurant brands. These independently operated brands have been serving customers for more than 50 years.

Let's see how things are shaping up for this announcement.

Factors to Consider

We are encouraged by the company's aggressive expansion efforts to develop its Tim Hortons brand in the Cincinnati area over the next 10 years. The company is also focusing on enhancing guest experience and increasing franchisee profitability to create value for all of its stakeholders in the second half of the year.

Comps at both the brands - Tim Hortons and Burger King - have shown considerable year-over-year improvement in the last two quarters backed by menu innovation, re-imaging and premium offerings. These initiatives to boost sales should aid third-quarter results as well.

However, costs incurred to execute the sales initiatives are taking a toll on the company's profits. Also, costs incurred to establish both the brands in new markets are denting profits. Additionally, the company incurred huge interest expenses. These costs are likely to remain high in the to-be-reported quarter. Like other food and restaurant companies, rising food costs pose a major challenge for Restaurant Brands, too.

Earnings Whispers

Our proven model does not conclusively show that Restaurant Brands is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Its Earnings ESP stands at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 30 cents.

Zacks Rank: Restaurant Brands has a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement.

Stocks to Consider

Here are some companies in the restaurant sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Darden Restaurants, Inc. DRI , with an Earnings ESP of +2.38% and a Zacks Rank #1 (Strong Buy).

Cracker Barrel Old Country Store, Inc. CBRL , with an Earnings ESP of +0.63% and a Zacks Rank #1.

Bob Evans Farms, Inc. BOBE , with an Earnings ESP of +2.50% and a Zacks Rank #1.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

RESTAURANT BRND (QSR): Free Stock Analysis Report

CRACKER BARREL (CBRL): Free Stock Analysis Report

DARDEN RESTRNT (DRI): Free Stock Analysis Report

BOB EVANS FARMS (BOBE): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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


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

In This Story

CBRLDRIQSR

Other Topics

Earnings Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More