Fast-food company Restaurant Brands International (NYSE: QSR) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 26.2% year on year to $2.30 billion. Its non-GAAP profit of $0.81 per share was 2.3% above analysts’ consensus estimates.
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Restaurant Brands (QSR) Q4 CY2024 Highlights:
- Revenue: $2.30 billion vs analyst estimates of $2.29 billion (26.2% year-on-year growth, in line)
- Adjusted EPS: $0.81 vs analyst estimates of $0.79 (2.3% beat)
- Adjusted EBITDA: $688 million vs analyst estimates of $675.3 million (30% margin, 1.9% beat)
- Operating Margin: 27.7%, in line with the same quarter last year
- Free Cash Flow Margin: 17.6%, down from 19.6% in the same quarter last year
- Locations: 32,125 at quarter end, up from 31,070 in the same quarter last year
- Same-Store Sales rose 2.5% year on year (6% in the same quarter last year)
- Market Capitalization: $21.65 billion
Company Overview
Formed through a strategic merger, Restaurant Brands International (NYSE: QSR) is a multinational corporation that owns three iconic fast-food chains: Burger King, Tim Hortons, and Popeyes.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years.
With $8.41 billion in revenue over the past 12 months, Restaurant Brands is one of the most widely recognized restaurant chains and benefits from customer loyalty, a luxury many don’t have. Its scale also gives it negotiating leverage with suppliers, enabling it to source its ingredients at a lower cost.
As you can see below, Restaurant Brands’s 8.5% annualized revenue growth over the last five years (we compare to 2019 to normalize for COVID-19 impacts) was decent as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Restaurant Brands’s year-on-year revenue growth of 26.2% was excellent, and its $2.30 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 10.3% over the next 12 months, an acceleration versus the last five years. This projection is commendable and suggests its newer menu offerings will catalyze better top-line performance.
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Restaurant Performance
Number of Restaurants
A restaurant chain’s total number of dining locations often determines how much revenue it can generate.
Restaurant Brands operated 32,125 locations in the latest quarter. It has opened new restaurants quickly over the last two years, averaging 2.9% annual growth, faster than the broader restaurant sector. Additionally, one dynamic making expansion more seamless is the company’s franchise model, where franchisees are primarily responsible for opening new restaurants while Restaurant Brands provides support.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Same-Store Sales
The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales gives us insight into this topic because it measures organic growth at restaurants open for at least a year.
Restaurant Brands has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 5.3%. This performance suggests its rollout of new restaurants is beneficial for shareholders. We like this backdrop because it gives Restaurant Brands multiple ways to win: revenue growth can come from new restaurants or increased foot traffic and higher sales per customer at existing locations.
In the latest quarter, Restaurant Brands’s same-store sales rose 2.5% year on year. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if Restaurant Brands can reaccelerate growth.
Key Takeaways from Restaurant Brands’s Q4 Results
It was encouraging to see Restaurant Brands beat analysts’ EPS expectations this quarter despite in line revenue. Overall, this quarter was fine. The stock traded up 1.8% to $68.11 immediately following the results.
Is Restaurant Brands an attractive investment opportunity at the current price? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
