Restaurant Brands International’s Price Target Raised at RBC Capital

KeyBanc analysts lowered their price target for Restaurant Brands International (NYSE:QSR) to $80 from $85 while maintaining their Overweight rating on the stock.

The analysts noted that the stock has declined 10% year-to-date, underperforming its peer group, which fell by 8%, and the S&P 500, which gained 15%. The analysts attribute this underperformance to sluggish industry trends and poor investor sentiment, as competitors have aggressively pushed value.

Proprietary data and industry discussions suggest that Q2 same-store sales (SSS) trends for Burger King in the U.S. may fall several percentage points below Street estimates. Consequently, the analysts reduced their SSS growth and EPS estimates for the company.

However, they believe Burger King is better positioned to compete due to efforts to improve operations and reduce reliance on deep discounts, such as coupons.

As a result, the analysts adjusted the price target to $80 and revised the 2024 and 2025 EPS estimates to $3.34 and $3.85, respectively, reflecting lower growth assumptions for Burger King U.S. SSS. Despite these adjustments, they maintained an Overweight rating on the stock, citing the health of other parts of the company’s business and long-term valuation upside driven by improvements in store-level cash flow, development, and visibility on store remodels.

On Tuesday, April 30, 2024, Restaurant Brands International Inc. (NYSE:QSR) disclosed its financial performance for the first quarter of the year, revealing a mixed bag of results. The company reported earnings per share (EPS) of $0.508, falling short of the anticipated $0.72. Despite this, QSR managed to exceed revenue expectations, posting figures around $1.74 billion against forecasts of $1.70 billion. This performance indicates a complex financial landscape for the company, where revenue growth outpaces earnings expectations, suggesting operational strengths amidst challenges in profitability.

During the earnings conference call, which saw participation from top executives and analysts from leading financial institutions, QSR outlined its financial achievements and strategic directions. The company's revenue of $1.74 billion, marking a 9.4% increase from the previous year, surpassed the Zacks Consensus Estimate by 1.40%. This achievement is particularly noteworthy as it reflects a robust demand for QSR's offerings, despite the EPS falling slightly below the previous year's figure of $0.73. The presence of high-profile analysts and the detailed discussion on the company's performance and outlook underscore the investment community's keen interest in QSR's business trajectory.

QSR's operational efficiency and strategic initiatives have been pivotal in driving its revenue growth. The company reported a significant uptick in system-wide sales, with a notable performance across its brands, including Tim Hortons, Burger King, and Popeyes Louisiana Kitchen. This growth is attributed to a combination of factors, including an expanded remodel program at Burger King US, aimed at modernizing the brand's image. Such investments in brand image and operational improvements are critical for sustaining growth and enhancing franchisee profitability, as highlighted by CEO Joshua Kobza. These efforts reflect the company's commitment to delivering value to both customers and shareholders, positioning it for long-term success.

Financially, QSR demonstrated solid performance with a net income of $230 million and a gross profit of $1.025 billion. The operating income stood at $544 million, mirroring the EBITDA, which indicates operational efficiency. Despite the lower-than-expected EPS, the company's ability to generate substantial revenue and maintain a healthy profit margin speaks to its operational resilience and strategic execution. The detailed financial metrics, including income before tax and income tax expense, provide a comprehensive view of the company's financial health, underscoring its ability to navigate the competitive landscape effectively.

In summary, Restaurant Brands International's first quarter of 2024 financial results reveal a company that is successfully expanding its revenue streams and maintaining operational efficiency, despite facing challenges in meeting earnings expectations. The strategic investments in brand development and operational improvements are likely to bolster the company's long-term growth prospects, as evidenced by the positive reception from the investment community and the detailed financial and operational metrics presented during the earnings call.

Loop Capital analysts upgraded Restaurant Brands International (NYSE:QSR) to a Buy rating from Hold and set a price target of $81.00 for the stock in response to the results from checks, which exceeded expectations.

According to Loop Capital's recent assessments of Burger King, same-store sales have been trending upward, experiencing a growth rate of approximately 8.5-9.0% from the beginning of the quarter through late September. This growth surpasses the Street estimate of a 7.7% increase for the third quarter. When viewed over a two-year period, this 8.5-9.0% growth equates to a substantial gain of 12.5-13.0%. This represents a significant improvement compared to Burger King's reported two-year domestic growth of 8.7% in the second quarter of 2023.

Restaurant Brands (NYSE:QSR) reported its Q4 results yesterday, with EPS of $0.72 coming in worse than the Street estimate of $0.74. Revenue was $1.69 billion, slightly better than the Street estimate of $1.67 billion.

The company also said that Joshua Kobza will become the new Chief Executive Officer (CEO) of the company starting on March 1, 2023. Mr. Kobza has been a part of the company for the past 11 years, and he has held the position of Chief Operating Officer for the last four years.

According to the analysts at Oppenheimer, the profit flow-through issues this quarter vs consensus appear idiosyncratic to Q4/22. Therefore, the analysts said they are buyers of the modest pullback in shares post-print, particularly into strengthening top-line momentum.