Restaurant Brands (QSR) Q3 Earnings: What's in the Cards?
Restaurant Brands International Inc. QSR is scheduled to report third-quarter 2017 numbers on Oct 26, before the opening bell.
Markedly, the company boasts a solid earnings surprise history. It surpassed the Zacks Consensus Estimate for earnings consistently over the past ten quarters, with an average positive surprise of 6.46% in the trailing four quarters.
Restaurant Brands International Inc. Price and EPS Surprise
Restaurant Brands International Inc. Price and EPS Surprise | Restaurant Brands International Inc. Quote
Consequently, Restaurant Brands’ shares have soared 49.2% in a year’s time, outperforming the industry’s 12.3% gain.
In fact, the company’s acquisition of Popeyes Louisiana Kitchen for $1.8 billion is likely to accelerate global unit development and resultantly propel the top line. Additionally, this buyout is anticipated to aid in cutting costs, hence proving accretive to the quarter’s earnings.
The Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at 49 cents, reflecting an increase of 13.6% over the prior-year quarter. Also, the quarter’s revenues are expected to improve 11.3% year over year to $1.2 billion.
Other Factors Likely to Affect Q3 Results
Restaurant Brands’ various sales-boosting initiatives like new product development, improved restaurant operations, re-imaging and promotional offerings at Tim Hortons and Burger King are expected to drive comps growth at both the brands. Particularly, expansion of delivery business at Burger King along with Tim Hortons’ launch of espresso-based beverages and introduction of its mobile app are likely to bolster comps.
Additionally, the company’s efforts to grow global restaurant footprint at all its iconic brands are anticipated to further boost the quarter’s performance.
Notably, we are encouraged by Restaurant Brands’ augmented focus on enhancing guest experience and increasing franchisee profitability to create value for all of its stakeholders.
However, costs related to various sales boosting initiatives are likely to hurt margins. Negative currency translation may further dent the quarter’s profitability, given the company’s considerable international presence.
Meanwhile, a soft consumer spending environment in the U.S. restaurant space might continue to limit revenue growth and hurt comps. Also, softness in certain product categories may hamper comps growth at Tim Hortons' while increased competitive pressure might weigh on Popeyes’ comps.
Taking into account the headwinds, our quantitative model predicts that Restaurant Brands does not have the right combination of two main ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.
Zacks ESP: Restaurant Brands has an Earnings ESP of -1.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Restaurant Brands carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP. However, we also need a positive ESP to be confident of an earnings beat.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a couple of stocks, which, as per our model, have the right combination of elements to post an earnings beat this quarter.
Noodles & Company NDLS has an Earnings ESP of +66.67% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
El Pollo Loco Holdings, Inc. LOCO has an Earnings ESP of +6.74% and a Zacks Rank #3.
DineEquity, Inc. DIN has an Earnings ESP of +5.14% and a Zacks Rank #3.
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