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Restaurant Brands (QSR) Q2 Earnings & Revenues Beat, Up Y/Y
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Restaurant Brands International, Inc. (QSR - Free Report) or RBI, reported decent second-quarter 2024 results. Both earnings and revenues beat the Zacks Consensus Estimate and increased on a year-over-year basis.
Following the results, shares of this one of the world's largest quick service restaurant companies gained 2% on Aug 8.
Post the Carrols and PLK China acquisitions, RBI created a new operating and reportable segment, Restaurant Holdings (RH). Investors should note that the second-quarter results include Carrols’ revenues, expenses and segment income from May 16 through Jun 30.
Earnings & Revenue Discussion
QSR reported adjusted earnings per share (EPS) of 86 cents, which surpassed the Zacks Consensus Estimate and prior year reported figure of 85 cents by 1.2%. Organically, the bottom line grew 3.1% year over year. The upside was primarily driven by increases in segmental income, partially offset by higher income tax and interest expense, net.
Restaurant Brands International Inc. Price, Consensus and EPS Surprise
Quarterly net revenues of $2.08 billion beat the consensus mark of $2.05 billion by 1.7% and increased 17.2% on a year-over-year basis. The upside was driven by strong system-wide sales growth at International (INTL), Tim Hortons (TH) and Popeyes Louisiana Kitchen (PLK), as well as RH contribution. These were partially offset by the elimination of franchise and property revenues, advertising revenues and other services revenues from the non-Carrols acquired Burger King (BK) restaurants. Unfavorable foreign currency also impacted the top line. Organically, the top line grew 7.1% year over year.
During the quarter, consolidated comparable sales (comps) increased 1.9%, and net restaurants grew 4% year over year. Global system-wide sales rose 5% year over year.
Segmental Revenues
Restaurant Brands operates through five segments — TH, BK, PLK, Firehouse Subs (FHS) and INTL. As of now, RH’s results for the Carrols and PLK China are included in the BK and INTL segments, respectively.
TH business reported revenues of $1.03 billion, up 2.2% from the prior-year quarter’s levels (3.9% organically). System-wide sales rose 5.4% year over year compared with 12.1% growth reported in the prior-year quarter. Comps rose 4.6% year over year compared with 11.8% a year ago.
BK’s revenues amounted to $364 million, up 11.5% from the year-ago period (11.6% organically). System-wide sales fell 0.7% year over year against growth of 8.1% reported in the prior-year quarter. Comps slipped 0.1% year over year versus 8.3% growth in the year-earlier quarter. Net restaurant growth was down 1.7% year over year compared with a 1.8% decline reported in the prior-year quarter.
PLK generated revenues of $194 million, up 12.2% year over year (12.3% organically). System-wide sales growth was 4.6% year over year compared with 9.9% growth reported in the prior-year quarter. Comps rose 0.5% year over year compared with 4.4% growth reported in the prior-year quarter. Net restaurant growth was 4.3% year over year compared with 5.6% growth a year ago.
FHS’ revenues totaled $53 million, up 10.3% from the year-ago levels (10.4% organically). System-wide sales growth was 3.3% compared with an improvement of 6.4% reported in the prior-year quarter. Net restaurant growth was 3.5% compared with 2% in the prior-year quarter. Comps fell 0.1% year over year against 3.4% growth reported in the prior-year quarter.
INTL segment revenues came in at $232 million, up 6.1% year over year (9.7% organically). System-wide sales growth was 9.2% year over year compared with 21.5% growth reported in the prior-year quarter. Comps rose 2.6% year over year compared with 12% growth reported in the prior-year quarter. Net restaurant growth was 8.2% year over year compared with a 9.2% increase a year ago.
Operating Performance
During the quarter, adjusted operating income rose 9.5%, 9.3% organically, year over year to $632 million. Adjusted EBITDA of $721 million was up 8.4% from $665 million reported in the prior-year quarter (7.5% organically).
Cash and Capital
Restaurant Brands ended the second quarter with a cash and cash equivalent balance of $942 million compared with $1.14 billion at 2023-end. As of Jun 30, 2024, long-term debt (net of current portion) was $13.1 billion compared with $12.9 billion as of 2023-end.
Net cash provided by operating activities was $482 million in the first half of 2024 compared with $487 million in the year-ago period. Free cash flow in the same period was $413 million versus $439 million a year ago. Adjusted EBITDA net leverage ratio stood at 5x, up from 4.9x in the prior-year period.
QSR’s board of directors announced a dividend payout of 58 cents per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership in the third quarter of 2024. The dividend is payable on Oct 4, 2024, to shareholders of record at the close of business as of Sep 20.
2024 Guidance Updated
RBI now expects adjusted net interest expense within $565-$575 million ($555-$565 million expected earlier) and segment G&A (excluding RH) in the $640-$660 million range ($665-$685 million projected earlier). Share-based compensation and non-cash incentive compensation expenses are now anticipated to be in the range of $170-$180 million versus the prior projection of $180-$190 million.
RBI still expects capital expenditures, tenant inducements and incentives (excluding RH) to be approximately $300 million.
Maintained Long-Term Guidance (2024-2028)
On Feb 15, 2024, the company unveiled its long-term consolidated performance expectations from 2024 to 2028. It anticipates achieving more than 3% growth in comparable sales and at least 5% net restaurant growth. QSR projects a system-wide sales growth exceeding 8%, with adjusted operating income expected to grow at a rate equal to or greater than the system-wide sales growth.
The Wendy’s Company (WEN - Free Report) reported dismal second-quarter fiscal 2024 results, with earnings and revenues missing the Zacks Consensus Estimate. On a year-over-year basis, the top line rose while the bottom line declined. Solid same-restaurant sales and strength in the U.S. breakfast sales and digital sales momentum aided the company’s performance.
The company continues to focus on industry-leading quality, innovation and value. WEN aims to maintain a customer-first approach while driving its restaurant economic model throughout the year and beyond.
Shake Shack Inc. (SHAK - Free Report) posted decent second-quarter fiscal 2024 results, with earnings meeting the Zacks Consensus Estimate and revenues beating the same. The bottom and top lines increased on a year-over-year basis. In the quarter, the company benefited from product innovations, strategic menu pricing, technology implementations and promotions.
Looking ahead, SHAK is committed to achieving efficiency across regions and formats by utilizing drive-throughs and third-party delivery. The company plans to reduce build costs by 10% in 2024 and further lower costs in 2025, enabling the exploration of new real estate options while maintaining returns. It intends to achieve strong unit-level economics and boost ROI, fostering long-term value creation for its shareholders.
Jack in the Box Inc. (JACK - Free Report) reported mixed second-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line also declined year over year.
In the fiscal third quarter, operating EPS came in at $1.65, beating the Zacks Consensus Estimate of $1.50. The metric rose 13.8% from $1.45 per share reported in the prior-year quarter.
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Restaurant Brands (QSR) Q2 Earnings & Revenues Beat, Up Y/Y
Restaurant Brands International, Inc. (QSR - Free Report) or RBI, reported decent second-quarter 2024 results. Both earnings and revenues beat the Zacks Consensus Estimate and increased on a year-over-year basis.
Following the results, shares of this one of the world's largest quick service restaurant companies gained 2% on Aug 8.
Post the Carrols and PLK China acquisitions, RBI created a new operating and reportable segment, Restaurant Holdings (RH). Investors should note that the second-quarter results include Carrols’ revenues, expenses and segment income from May 16 through Jun 30.
Earnings & Revenue Discussion
QSR reported adjusted earnings per share (EPS) of 86 cents, which surpassed the Zacks Consensus Estimate and prior year reported figure of 85 cents by 1.2%. Organically, the bottom line grew 3.1% year over year. The upside was primarily driven by increases in segmental income, partially offset by higher income tax and interest expense, net.
Restaurant Brands International Inc. Price, Consensus and EPS Surprise
Restaurant Brands International Inc. price-consensus-eps-surprise-chart | Restaurant Brands International Inc. Quote
Quarterly net revenues of $2.08 billion beat the consensus mark of $2.05 billion by 1.7% and increased 17.2% on a year-over-year basis. The upside was driven by strong system-wide sales growth at International (INTL), Tim Hortons (TH) and Popeyes Louisiana Kitchen (PLK), as well as RH contribution. These were partially offset by the elimination of franchise and property revenues, advertising revenues and other services revenues from the non-Carrols acquired Burger King (BK) restaurants. Unfavorable foreign currency also impacted the top line. Organically, the top line grew 7.1% year over year.
During the quarter, consolidated comparable sales (comps) increased 1.9%, and net restaurants grew 4% year over year. Global system-wide sales rose 5% year over year.
Segmental Revenues
Restaurant Brands operates through five segments — TH, BK, PLK, Firehouse Subs (FHS) and INTL. As of now, RH’s results for the Carrols and PLK China are included in the BK and INTL segments, respectively.
TH business reported revenues of $1.03 billion, up 2.2% from the prior-year quarter’s levels (3.9% organically). System-wide sales rose 5.4% year over year compared with 12.1% growth reported in the prior-year quarter. Comps rose 4.6% year over year compared with 11.8% a year ago.
BK’s revenues amounted to $364 million, up 11.5% from the year-ago period (11.6% organically). System-wide sales fell 0.7% year over year against growth of 8.1% reported in the prior-year quarter. Comps slipped 0.1% year over year versus 8.3% growth in the year-earlier quarter. Net restaurant growth was down 1.7% year over year compared with a 1.8% decline reported in the prior-year quarter.
PLK generated revenues of $194 million, up 12.2% year over year (12.3% organically). System-wide sales growth was 4.6% year over year compared with 9.9% growth reported in the prior-year quarter. Comps rose 0.5% year over year compared with 4.4% growth reported in the prior-year quarter. Net restaurant growth was 4.3% year over year compared with 5.6% growth a year ago.
FHS’ revenues totaled $53 million, up 10.3% from the year-ago levels (10.4% organically). System-wide sales growth was 3.3% compared with an improvement of 6.4% reported in the prior-year quarter. Net restaurant growth was 3.5% compared with 2% in the prior-year quarter. Comps fell 0.1% year over year against 3.4% growth reported in the prior-year quarter.
INTL segment revenues came in at $232 million, up 6.1% year over year (9.7% organically). System-wide sales growth was 9.2% year over year compared with 21.5% growth reported in the prior-year quarter. Comps rose 2.6% year over year compared with 12% growth reported in the prior-year quarter. Net restaurant growth was 8.2% year over year compared with a 9.2% increase a year ago.
Operating Performance
During the quarter, adjusted operating income rose 9.5%, 9.3% organically, year over year to $632 million. Adjusted EBITDA of $721 million was up 8.4% from $665 million reported in the prior-year quarter (7.5% organically).
Cash and Capital
Restaurant Brands ended the second quarter with a cash and cash equivalent balance of $942 million compared with $1.14 billion at 2023-end. As of Jun 30, 2024, long-term debt (net of current portion) was $13.1 billion compared with $12.9 billion as of 2023-end.
Net cash provided by operating activities was $482 million in the first half of 2024 compared with $487 million in the year-ago period. Free cash flow in the same period was $413 million versus $439 million a year ago. Adjusted EBITDA net leverage ratio stood at 5x, up from 4.9x in the prior-year period.
QSR’s board of directors announced a dividend payout of 58 cents per common share and partnership exchangeable unit of Restaurant Brands International Limited Partnership in the third quarter of 2024. The dividend is payable on Oct 4, 2024, to shareholders of record at the close of business as of Sep 20.
2024 Guidance Updated
RBI now expects adjusted net interest expense within $565-$575 million ($555-$565 million expected earlier) and segment G&A (excluding RH) in the $640-$660 million range ($665-$685 million projected earlier). Share-based compensation and non-cash incentive compensation expenses are now anticipated to be in the range of $170-$180 million versus the prior projection of $180-$190 million.
RBI still expects capital expenditures, tenant inducements and incentives (excluding RH) to be approximately $300 million.
Maintained Long-Term Guidance (2024-2028)
On Feb 15, 2024, the company unveiled its long-term consolidated performance expectations from 2024 to 2028. It anticipates achieving more than 3% growth in comparable sales and at least 5% net restaurant growth. QSR projects a system-wide sales growth exceeding 8%, with adjusted operating income expected to grow at a rate equal to or greater than the system-wide sales growth.
Zacks Rank
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.
Recent Retail-Wholesale Releases
The Wendy’s Company (WEN - Free Report) reported dismal second-quarter fiscal 2024 results, with earnings and revenues missing the Zacks Consensus Estimate. On a year-over-year basis, the top line rose while the bottom line declined. Solid same-restaurant sales and strength in the U.S. breakfast sales and digital sales momentum aided the company’s performance.
The company continues to focus on industry-leading quality, innovation and value. WEN aims to maintain a customer-first approach while driving its restaurant economic model throughout the year and beyond.
Shake Shack Inc. (SHAK - Free Report) posted decent second-quarter fiscal 2024 results, with earnings meeting the Zacks Consensus Estimate and revenues beating the same. The bottom and top lines increased on a year-over-year basis. In the quarter, the company benefited from product innovations, strategic menu pricing, technology implementations and promotions.
Looking ahead, SHAK is committed to achieving efficiency across regions and formats by utilizing drive-throughs and third-party delivery. The company plans to reduce build costs by 10% in 2024 and further lower costs in 2025, enabling the exploration of new real estate options while maintaining returns. It intends to achieve strong unit-level economics and boost ROI, fostering long-term value creation for its shareholders.
Jack in the Box Inc. (JACK - Free Report) reported mixed second-quarter fiscal 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same. The top line also declined year over year.
In the fiscal third quarter, operating EPS came in at $1.65, beating the Zacks Consensus Estimate of $1.50. The metric rose 13.8% from $1.45 per share reported in the prior-year quarter.