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Restaurant Brands (QSR) Q2 Earnings Beat Estimates, Stock Up

·5-min read

Restaurant Brands International, Inc. QSR reported impressive second-quarter 2022 results, with earnings and revenues surpassing the Zacks Consensus Estimate. The metrics increased on a year-over-year basis. The quarterly results were primarily driven by solid sales growth (at Tim Hortons Canada), development strength (at Popeyes) and a strong contribution from digital sales. Following the announcement, shares of the company gained 7.4% during trading hours on Aug 4.

Earnings & Revenue Discussion

During second-quarter 2022, the company reported adjusted earnings per share (EPS) of 82 cents, beating the Zacks Consensus Estimate of 73 cents by 12.3%. The bottom line increased 6.5% year over year from an adjusted EPS of 77 cents reported in the prior-year quarter.

Quarterly net revenues of $1,639 million surpassed the consensus mark of $1,572 million. The top line increased 14% on a year-over-year basis. The upside was driven by a rise in system-wide sales at Tim Hortons, Burger King and Popeyes. However, this was partially offset by unfavorable FX movements. Digital sales during the quarter came in at more than $3 billion.

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 four segments — Tim Hortons, Burger King, Popeye’s Louisiana Kitchen and Firehouse Subs.

During second-quarter 2022, revenues in Tim Hortons totaled $968 million, up 16.5% from the prior-year quarter’s levels. System-wide sales increased 16.3% year over year compared with a growth of 33% reported in the prior-year quarter. Comps in the segment rose 12.2% year over year compared with a 27.6% rise reported in the year-ago quarter. In the quarter under review, net restaurant growth was recorded at 5.7% compared with a rise of 2.7% reported in the prior-year quarter.

During the quarter, Burger King’s revenues totaled $473 million, indicating growth of 3.1% from the prior-year quarter’s levels. System-wide sales growth in the segment increased 14.6% year over year compared with 37.9% growth reported in the prior-year quarter. Comps rose 10% year over year compared with a growth of 18.2% reported in the prior-year quarter. In the second quarter, net restaurant growth was 2.8% compared with an increase of 0.1% reported in the prior-year quarter.

Popeye’s Louisiana Kitchen generated revenues of $165 million in second-quarter 2022, up 11.5% from the prior-year quarter’s levels. System-wide sales growth came in at 9.9% year over year compared with a 10.5% growth recorded in the prior-year quarter. Comps in the segment rose 1.4% year over year against a 0.3% decline reported in the prior-year quarter. Net restaurant growth came in at 8.1% compared with a 5.7% growth reported in the prior-year quarter.

During the quarter, Firehouse Subs generated revenues of $33 million. System-wide sales growth came in at 2.2% year over year compared with 37.9% recorded in the prior-year quarter. Net restaurant growth came in at 2.5% year over year, compared with 2.5% reported in the prior-year quarter. Comps in the segment dropped 1.4% year over year against a 31.2% rise reported in the prior-year quarter.

Operating Performance

In the quarter under review, the company’s adjusted EBITDA came in at $618 million compared with $577 million reported in the prior-year quarter. On an organic and reported basis, the upside was driven by an increase in Tim Hortons, Popeye’s and Burger King adjusted EBITDA.

Segment-wise, Tim Horton’s adjusted EBITDA increased 8.3% year over year to $274 million. Burger King’s adjusted EBITDA rose 1.5% year over year to $270 million. Popeye’s adjusted EBITDA came in at $61 million, up 5.2% year over year. During the quarter, adjusted EBITDA from the Firehouse Subs came in at $13 million.

Cash and Capital

Restaurant Brands ended the second quarter with a cash and cash equivalent balance of $838 million compared with $895 million reported in the previous quarter. As of Jun 30, 2022, long-term debt (net of current portion) stood at approximately $12.9 billion, almost flat sequentially.

The company’s board of directors announced a dividend payout of 54 cents per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership in third-quarter 2022. The dividend is payable on Oct 5, 2022, to shareholders of record at the close of business as of Sep 21, 2022.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the Zacks Retail-Wholesale sector are Titan Machinery Inc. TITN, Arcos Dorados Holdings Inc. ARCO and Dollar Tree Inc. DLTR.

Titan Machinery sports a Zacks Rank #1. TITN has a trailing four-quarter earnings surprise of 52.4%, on average. Shares of TITN have increased 6.4% in the past year.

The Zacks Consensus Estimate for Titan Machinery’s 2022 sales and EPS suggests growth of 23.8% and 6.4%, respectively, from the corresponding year-ago period’s levels.

Arcos Dorados carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth of 34.4%. Shares of the company have increased 30.2% in the past year.

The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 25.7% and 120.8%, respectively, from the year-ago period’s levels.

Dollar Tree carries a Zacks Rank #2. DLTR has a trailing four-quarter earnings surprise of 13.1%, on average. The stock has gained 63.9% in the past year.

The Zacks Consensus Estimate for Dollar Tree’s 2022 sales and EPS suggests growth of 6.7% and 40.5%, respectively, from the corresponding year-ago period’s levels.


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