Restaurant Brands (QSR) Q3 Earnings Beat Estimates, Fall Y/Y

Zacks Equity Research
·5 min read

Restaurant Brands International, Inc. QSR reported third-quarter 2020 results, wherein earnings beat the Zacks Consensus Estimate, while revenues met the same. However, the top and the bottom line declined on a year-over-year basis.

The company’s adjusted earnings of 68 cents per share beat the Zacks Consensus Estimate of 62 cents by 9.7%. However, the bottom line fell 5.6% from the prior-year quarter’s figure of 72 cents.

Revenues during the third quarter of 2020 were in line with the consensus mark of $1,337 million. However, the top line declined 8.3% on a year-over-year basis, primarily due to a drop in system-wide sales at Tim Hortons and Burger King segments. This along with a decrease in supply chain sales was partially offset by an increase in system-wide sales at Popeye’s Louisiana Kitchen. Also, unfavorable foreign exchange (FX) movements added to the downside. Following the results, the company’s shares declined 3.6% during trading hours on Oct 28.

Restaurant Brands International Inc. Price, Consensus and EPS Surprise

 

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

Restaurant Brands International Inc. price-consensus-eps-surprise-chart | Restaurant Brands International Inc. Quote

Segmental Revenues

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

During the third quarter, revenues at Tim Hortons totaled $762 million compared with $881 million in the prior-year quarter. System-wide sales declined 13.7% compared with 0.1% fall in the prior-year quarter. Comps at this segment declined 12.5% compared with a 1.4% fall in the prior-year quarter. The decline was primarily led by lower system-wide sales. It was also negatively impacted by FX movements on a reported basis. In the quarter, net restaurant growth was recorded at 1% compared with 1.7% in the prior-year quarter.

Burger King’s revenues totaled $433 million in third-quarter 2020, compared with $457 million in the prior-year quarter. The decline was primarily because of decrease in system-wide sales along with negative FX movements on a GAAP basis. Also, system-wide sales declined 7.9% against 10.7% growth in the prior-year quarter. Comps in this segment also declined 7% against 4.8% growth in the prior-year quarter. In the third quarter, net restaurant growth was recorded at 2.4% compared with 5.8% in the prior-year quarter.

Popeye’s Louisiana Kitchen reported revenues of $142 million in the third quarter of 2020, compared with $120 million in the prior-year quarter. System-wide sales rose 21.5% compared with the prior-year quarter’s 15.6% increase. Meanwhile, net restaurant growth came in at 7.1% compared with 5.6% growth in the prior-year quarter. Comps at this segment rose 17.4% compared with 9.7% growth in the prior-year quarter.

Operating Performance

In the quarter under review, the company’s adjusted EBITDA declined 6.6% year over year to $561 million primarily due to lower sales at Tim Hortons and Burger King, partially offset by an increase in Popeye’s sales. Segment-wise, Tim Horton’s adjusted EBITDA declined 14.1% from the year-ago quarter’s tally. Burger King’s adjusted EBITDA decreased 3.3% year over year. However, Popeye’s adjusted EBITDA surged 23.4% from the year-ago quarter.

Cash and Capital

Restaurant Brands ended the third quarter with cash and cash equivalent balance of $1,919 million, compared with $1,732 million in the prior-year quarter. As of Sep 30, 2020, its total debt was $12.9 billion compared with $12.8 billion as on Sep 30, 2019. The company’s board of directors announced a dividend of 52 cents per common share and partnership exchangeable unit of RBI LP for fourth-quarter 2020. The dividend is payable on Jan 5, 2021, to shareholders of record at the close of business as of Dec 21, 2020.

Other Updates

As of September-end, 96% of the company’s restaurants remained open worldwide, that included restaurants in North America, Asia Pacific and Europe, Middle East and Africa. Meanwhile, 92% of the restaurants remined open in Latin America.

Zacks Rank & Key Picks

Restaurant Brands currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the same space include Brinker International, Inc. EAT Chuy's Holdings, Inc. CHUY and Fiesta Restaurant Group, Inc. FRGI, each sporting a Zacks Rank #1.

Brinker has a three-five-year earnings per share growth rate of 12.7%.

Chuy's Holdings has a trailing four-quarter earnings surprise of 87.3%, on average.

Fiesta Restaurant’s 2021 earnings are expected to surge 260.7%.

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