Restaurant Brand’s Q2 Earnings Preview: What Are We Watching?

Restaurant Brands International Inc. stock (NYSE: QSR) is one of the largest fast-food restaurant chains in the world and it is a combination of Burger King, Tim Hortons, Popeyes, and, since late 2021, also Firehouse Subs. The company is scheduled to report its fiscal second-quarter results on Thursday, August 4. We expect QSR’s stock to see little to no movement due to revenues coming in line, and earnings missing expectations marginally in its second-quarter results. The fast-food giant’s next few quarters might show high volatility given the current macroeconomic situation. However, the company showcases solid mid-to-long term growth prospects. The revenue stream of QSR is directly influenced by the system sales it generates across its brands, which can be increased by growing restaurant sales or by adding as many restaurants as possible. Notably, the company’s net restaurant growth grew 4.4% year-over-year in Q1 FY’22 – despite significant cost inflation. Also, Tim Horton’s, Popeyes, and Firehouse Subs are far less penetrated across international markets compared to McDonald’s or Burger King. That means more room to open new restaurants and a longer runway for revenue growth.

Our forecast indicates that Restaurant Brands’ valuation is $53 per share, which is 3% lower than the current market price. Look at our interactive dashboard analysis on Restaurant Brands Earnings Preview: What To Expect in Fiscal Q2? for more details.

(1) Revenues expected to be in line with consensus estimates

Trefis estimates QSR’s Q2 2022 revenues to be around $1.6 Bil, in line with the consensus estimate. QSR’s Q1 revenues grew 15% y-o-y to $1.45 billion, fueled by strong same-store sales growth from Burger King’s overseas restaurants. In the first quarter, same-store sales at Burger King spiked 20% internationally, but they were flat in its home market as the chain tries to revive demand. Worldwide, Burger King saw its same-store sales climb 10% in the quarter, while Tim Hortons (a coffee chain based out of Canada) comp sales grew 8%, and Popeyes (a fried chicken chain) comp sales saw a fall of 3% in Q1. In terms of unit growth, the value grew 3% for Burger King, 7% for Tim Hortons, and 8% for Popeyes. Q1 was the first full quarter that Restaurant Brands’ acquisition of Firehouse Subs (a sandwich chain) was included in its revenue. Firehouse chain saw same-store sales growth of 4.2% in the quarter. It should be noted that only locations that have been open for at least 13 months are included in its same-store sales metrics.

2) EPS is also likely to marginally miss consensus estimates

QSR’s Q2 2022 earnings per share (EPS) is expected to come in at 72 cents per Trefis analysis, a cent lower than the consensus estimate. In Q1, the company’s earnings were flat y-o-y at 59 cents, and its adjusted EBITDA grew 10% y-o-y to $530 million over the same period.

(3) Stock price estimate appropriately priced to current market price

Going by our QSR’s Valuation, with an EPS estimate of around $2.98 and a P/E multiple of 17.7x in fiscal 2022, this translates into a price of $53, which is almost 3% lower than the current market price.

It is helpful to see how its peers stack up. QSR Peers shows how Restaurant Brands’ stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

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[1] Month-to-date and year-to-date as of 8/3/2022
[2] Cumulative total returns since the end of 2016