It has been about a month since the last earnings report for Restaurant Brands (QSR Quick QuoteQSR - Free Report) . Shares have added about 4.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Restaurant Brands due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Restaurant Brands Q3 Earnings & Revenues Miss Estimates, Rise Y/Y

Restaurant Brands reported third-quarter 2024 results with earnings and revenues missing the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis.

QSR’s Q3 Earnings & Revenue Discussion

QSR reported adjusted earnings per share (EPS) of 93 cents, missing the Zacks Consensus Estimate of 94 cents. Organically, the bottom line grew 4.6% year over year.

Quarterly net revenues of $2.29 billion missed the consensus mark of $2.3 billion by 0.5%. The top line increased 24.7% on a year-over-year basis. On an organic level, the rise in upside was due to the net impact of non-Carrols-acquired BK restaurants and the acquisition of PLK Carrols restaurants. Additionally, organic revenue growth benefited from system-wide sales increases at International (INTL) and Tim Hortons (TH). However, it was partially offset by declines in system-wide sales at Burger King (BK), Popeyes Louisiana Kitchen (PLK) and Firehouse Subs (FHS).

During the quarter, consolidated comparable sales (comps) increased 0.3%, and net restaurants grew 3.8% year over year. Global system-wide sales rose 3.2% year over year.

Segmental Revenues

Restaurant Brands operates through five segments — TH, BK, PLK, 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 $1.04 billion, down 0.8% from the prior-year quarter’s levels. Organically, revenues were up 0.7% year over year. System-wide sales rose 2.8% year over year compared with the 8.1% growth reported in the prior-year quarter. Comps rose 2.3% year over year compared with a 7.6% rise in the year-ago period.

BK’s revenues amounted to $362 million, up 10.1% from the year-ago period (10.2% organically). System-wide sales fell 1.5% year over year against growth of 6.4% reported in the prior-year quarter. Comps slipped 0.7% year over year versus 6.6% growth in the year-earlier quarter. Net restaurant growth was down 1.5% year over year compared with a 2.4% decline reported in the prior-year quarter.

PLK generated revenues of $195 million, up 9.7% year over year (9.8% organically). System-wide sales fell 0.6% year over year against growth of 11.2% reported in the prior-year quarter. Comps fell 4% year over year versus the 5.6% growth reported in the prior-year quarter. Net restaurant growth was 4.1% year over year compared with 5.3% growth a year ago.

FHS’ revenues totaled $53 million, up 4.1% from the year-ago levels (4.2% organically). System-wide sales fell 1.3% against an improvement of 7% reported in the prior-year quarter. Net restaurant growth was 3.9% compared with 2.5% in the prior-year quarter. Comps fell 4.8% year over year against 3.6% growth reported in the prior-year quarter.

INTL segment revenues came in at $243 million, up 6.4% year over year (8.6% organically). System-wide sales growth was 8% year over year compared with the 15.6% growth reported in the prior-year quarter. Comps rose 1.8% year over year compared with the 7.7% growth reported in the prior-year quarter. Net restaurant growth was 7.6% year over year compared with a 9.5% increase a year ago.

Operating Performance

During the quarter, adjusted operating income rose 7.1% year over year to $652 million. Our projection for the metric was $636.6 million.

Adjusted EBITDA of $748 million was up 7.2% from $698 million reported in the prior-year quarter. Our estimate for the metric was $735.7 million.

Cash and Capital

Restaurant Brands ended the third quarter with a cash and cash equivalent balance of $1.2 billion compared with $1.31 billion as of Sept. 30, 2023. As of Sept. 30, 2024, long-term debt (net of current portion) was $13.6 billion compared with $12.9 billion as of Sept. 30, 2023.

Net cash provided by operating activities (for the nine months ended Sept. 30) was $1.02 billion compared with $920 million in the year-ago period. Free cash flow in the same period was $898 million versus $847 million a year ago. Adjusted EBITDA net leverage ratio stood at 4.8, flat year over year.

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 fourth quarter of 2024. The dividend is payable on Jan. 3, 2025, to shareholders of record at the close of business as of Dec. 20, 2024.

2024 Guidance Updated

RBI now expects adjusted net interest expense within $565-$575 million and segment G&A (excluding RH) in the $640-$650 million range. Share-based compensation and non-cash incentive compensation expenses are now anticipated to be in the range of $170-$175 million versus the prior projection of $170-$180 million.

RBI still expects capital expenditures, tenant inducements and incentives (excluding RH) to be approximately $300 million.

Maintained Long-Term Guidance (2024-2028)

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 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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Restaurant Brands has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Restaurant Brands has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Restaurant Brands belongs to the Zacks Retail - Restaurants industry. Another stock from the same industry, Brinker International (EAT Quick QuoteEAT - Free Report) , has gained 11.2% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Brinker International reported revenues of $1.14 billion in the last reported quarter, representing a year-over-year change of +12.5%. EPS of $0.95 for the same period compares with $0.28 a year ago.

Brinker International is expected to post earnings of $1.38 per share for the current quarter, representing a year-over-year change of +39.4%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.9%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Brinker International. Also, the stock has a VGM Score of B.