Restaurant Brands

Restaurant Brands Tops Q1 Earnings Estimates; Target Price $80 in Best Case

Restaurant Brands International, a global multi-brand franchisor of fast-food restaurants, reported better-than-expected earnings in the first quarter of 2021 and the CEO signaled that the company returned to growth after the COVID-19 slowdown, sending its shares up about 1.2% on Friday.

The parent company of Burger King and Popeye reported quarterly earnings of $0.55 per share during the quarter ended March 31, 2021, beating the Wall Street consensus estimates of $0.50 per share, also, up from $0.48 per share seen in the same period a year ago. Restaurant Brands’ revenues rose about 1% to $1.26 billion.

The company said, as of the end of March 2021, 95% of our restaurants were open worldwide, including substantially all of our restaurants in North America and the Asia Pacific and approximately 92% and 84% of our restaurants in Europe, the Middle East, and Africa and Latin America, respectively.

The U.S.-listed Restaurant Brands shares rose 1.2% to $68.61 on Monday.

“Our first-quarter results signal our return to growth with system-wide sales surpassing Q1 2019 and net restaurant growth nearly matching our best-ever Q1 performance in 2018.  We are excited by the global growth potential of our brands and are encouraged by this early momentum as we work toward a return to historic levels of unit growth this year,” said José E. Cil, Chief Executive Officer of Restaurant Brands.

Analyst Comments

“A relatively in line quarter on top and bottom line, with the hoped-for recovery of Tim’s delayed by new restrictions in Canada. BK strong, esp in the US, but lags other QSRs that have reported thus far. Encouraging data points on digital, unit development. Numbers up modestly, price target to $70,” said John Glass, equity analyst at Morgan Stanley.

“Multi-brand platform QSR operator with a global network of master franchisees. The ability to grow multiple brands through master franchisees is a strategic advantage and drives solid unit growth. Asset lite franchised business model, Lower G&A/capex drive FCF though more spending may be needed as peers ramp investment. Comp-store sales variable. Burger King US and Tim’s have lagged some peers and have room to improve, though we see fewer catalysts beyond easy compares in ’21. Valuation attractive based on FCF and history, though gap to peers has persisted and QSR is not unique in trading at a discount to history among peers.”

Restaurant Brands Stock Price Forecast

Sixteen analysts who offered stock ratings for Restaurant Brands in the last three months forecast the average price in 12 months of $70.14 with a high forecast of $80.00 and a low forecast of $61.00.

The average price target represents a 2.23% increase from the last price of $68.61. Of those 16 analysts, 11 rated “Buy”, five rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $70 with a high of $92 under a bull scenario and $48 under the worst-case scenario. The firm gave an “Equal-weight” rating on the fast-food holding company’s stock.

Several other analysts have also updated their stock outlook. Stifel raised the target price to $75 from $70. UBS lifted the target price to $74 from $71. Citigroup issued a buy rating and a $74.00 target price on the stock. BMO Capital Markets lifted their price objective to $71 from $66.

“We view shares as fairly valued trading in-line on an FY2 EV/EBITDA basis relative to global, highly franchised peers DPZ, MCD and YUM. Indeed, over the last 5 years, shares have traded in-line with peers while over the last 3 years, shares have traded at an 8% discount. We nudge our price target to $68 from $65, predicated on shares’ 17x FY2 EV/EBITDA multiple sustaining,” noted Andrew M. Charles, equity analyst at Cowen.

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