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Restaurant Brands Up Despite Q4 Loss, Comps Rise Y/Y - Analyst Blog

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Restaurant Brands International ( QSR ) recently reported fourth quarter 2014 results - its first quarterly results after the merger of Tim Hortons Inc. and Burger King Worldwide Inc. in Dec 2014. Share price of the newly formed company surged 8.8% following the results driven by the surge in sales.

The parent company of two iconic brands Burger King (BK) and Tim Hortons (TH) reported a loss of $2.52 per share in the fourth quarter that compared unfavourably with the year-ago profit of 19 cents and the Zacks Consensus Estimate of 26 cents per share. The number however includes advisers' fees combined with other expenses related to the merger of these two brands.

Restaurant Brands reported quarterly revenues of $416.3 million, up 57% year over year.

Restaurant Brands consolidated results however includes a full quarter of Burger King Worldwide but only covers Tim Hortons' financials from Dec 12 through the end of 2014.

Behind the Headline Numbers

Quarterly revenues of $274.2 million at BK increased 7.8% year over year on an organic basis due to comps growth and revenues from new restaurants. Comps growth of 3% was driven by strong growth in the U.S. and Canada, Europe, the Middle East, and Africa, Asia Pacific, and Latin America and the Caribbean. Sales boost initiatives like menu innovation, re-imaging and premium offerings aided results. Results on an organic basis are non-GAAP measures that exclude both foreign exchange impact and net re-franchising. Adjusted EBITDA of $189.1 million grew 8.8% year over year on an organic basis.

Fourth quarter revenues at TH were $824.7 million, up 3.7% year over year owing to unit acceleration as well as comps growth. Comparable sales grew 4.1% in the fourth quarter, driven by acceleration in comps in Canada and continued strong results in the U.S. Comparable sales growth in Canada was the result of the brand's successful Dark Roast coffee launch and continued success in building the lunch day part through relevant menu innovations. TH's adjusted EBITDA grew 10.2% on an organic basis to $209 million. Tim Hortons' results are discussed for informational purpose only.

Full Year Results

The company incurred a loss of $2.34 per share in 2014 as against a profit of 65 cents in 2013. Total revenue was $1.20 billion, up 4.4% year over year.

To Conclude

Like in the current quarter, we expect Restaurant Brands to continue to benefit from the strength of both the iconic brands. The combined business is expected to generate about $22 billion in sales and constitute more than 18,000 restaurants in 100 countries. Besides offering revenue synergies as a result of accelerated international growth, the combination of these two brands is expected to generate costs savings as well. Restaurant Brands International currently has a Zacks Rank #2 (Buy).

Other Stocks to Consider

Investors interested in the restaurant industry can also consider Dave & Buster's Entertainment, Inc. ( PLAY ), Ignite Restaurant Group, Inc. ( IRG ) and Papa Murphy's Holdings, Inc. ( FRSH ). All these stocks sport a Zacks Rank #1 (Strong Buy).

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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.


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

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