Restaurant Brands International NYSE:QSR, the fast-food giant behind Burger King, Tim Hortons, Popeyes and Firehouse Subs, delivered another quarter of growth, but investors were not impressed. Shares slipped about 1.6% in Thursday trading even after comparable sales rose 3.8%, systemwide sales climbed 6.4% and international systemwide sales jumped 10.7%. The company also handed $435 million back to shareholders through dividends and buybacks, showing cash generation remains a clear strength.
The real story was Burger King. Reuters reported the chain's U.S. comparable sales surged 8.5%, crushing analyst expectations of roughly 3.5% as value meals, restaurant upgrades and marketing campaigns kept customers coming through the door. Adjusted earnings increased to $1.07 per share from $0.94 a year earlier. The rest of the portfolio looked far less exciting. Tim Hortons posted just 0.1% comparable-sales growth in Canada, Popeyes' U.S. comparable sales dropped 5.2%, while international comparable sales advanced 5.5%, once again proving overseas markets are doing much of the heavy lifting.
This quarter had one clear winner and two obvious laggards. Burger King is firing on all cylinders, but Tim Hortons is barely moving and Popeyes is still going backwards. Until those brands start pulling their weight, investors will probably keep questioning how much runway this turnaround really has.
The GF Value chart adds another twist. With the stock trading at $73.06 versus a GF Value estimate of $86.29, shares appear about 15.3% below fair value. If Burger King's momentum keeps rolling and management can revive its weaker brands, today's discount could end up looking like an opportunity rather than a warning sign.