Restaurant Brands International Inc (TSX:QSR) Shows Minimal Growth in Q3

Restaurant Brands International Inc (TSX:QSR)(NYSE:QSR) continues to face challenges as sales remain a big problem for the company.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

On Wednesday, Restaurant Brands International Inc (TSX:QSR)(NYSE:QSR) released its third-quarter results. While profits were up slightly from the prior year, sales under the previous accounting standards would have come in at 2% less than last year’s numbers. Restaurant Brands has struggled in its previous quarters to grow sales, particularly with Tim Hortons lagging behind.

Let’s take a closer look at the results to see how the company did and whether you should consider buying the stock today.

Comparable sales show minimal growth

Overall, all of the three restaurant chains struggled to show much organic growth this past quarter. Tim Hortons, which a year ago saw a growth rate of just 0.3% actually improved to 0.6%. Burger King’s rate of increase fell from 3.6% to just 1%, while Popeyes saw growth of 0.5%, up from a decline of 1.8% last year. None of those numbers look impressive on their own, even if they are improvements from a year ago.

For investors to get excited about a stock and pay a premium for it, there has to be much more growth than just 1%. If we don’t focus on comparable sales, then the results can get skewed as an increase in the number of restaurants can easily increase sales, but it’s a finite strategy and doesn’t truly reflect how a brand is doing versus where it was a year ago.

Popeyes, for instance, saw total sales growth of 7.9% this past quarter, which was the highest among the three brands. However, it also added 213 restaurants, for an increase of 7.6%, which was also the most among the chains.

Why net income was up 2.6%

Looking at the bottom line, you would have expected that Restaurant Brands had a strong quarter and may have concluded that its chains must have been doing well. However, with sales up by less than 2%, it didn’t come as a result of a strong top line.

Instead, the company saw operating expenses decline by more than 4% as it saw improvements in all of its main expense items, aside from other operating expenses, which were up nearly US$5 million. These improvements helped boost operating income by a little more than US$3 million from a year ago.

Overall, there was minimal change in operating income from a year ago, and the improvement in net income came as a result of last year’s totals being softer, which included a loss on an extinguishment of debt, which was largely offset by lower tax expenses. The total impact is summarized below:

2018 2017 Change
Income from operations $482.9 $479.3 $3.6
Interest expense (net) $134.2 $136 -$1.8
Loss on extinguishment of debt $0 $58.2 -$58.2
Income tax expense $93.4 $38.3 $55.1
Net income $255.3 $246.8 $8.5

*All figures in millions (USD)

Bottom line

Restaurant Brands didn’t have a particularly strong quarter, and much of the improved results from last year came as a result of items that were below operating income, which can be a bit misleading.

Overall, without seeing much more significant sales growth, it would be hard to justify investing in the stock today. Restaurant Brands is making plans to try to strengthen its Tim Hortons’ brand, but whether that will prove to be successful remains to be seen.

Should you invest $1,000 in Restaurant Brands International right now?

Before you buy stock in Restaurant Brands International, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Restaurant Brands International wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of RESTAURANT BRANDS INTERNATIONAL INC.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Investing

voice-recognition-talking-to-a-smartphone
Investing

Telus: Buy, Sell, or Hold in 2025?

Telus has been on a downward trend for three years. Is the stock now oversold?

Read more »

Hourglass and stock price chart
Dividend Stocks

Where I’d Put $50,000 Right Away in Top Canadian Stocks for Growth and Income

TSX dividend stocks such as Savaria and CNQ are top choices for investors looking for growth and income in 2025.

Read more »

data center server racks glow with light
Tech Stocks

Shopify vs. Constellation Software: Where I’d Allocate $8,000 for Tech Exposure

Shopify (TSX:SHOP) stock and another tech play look like bargains right now.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Tuesday, April 15

Besides Canada’s consumer inflation report for March, TSX investors will also continue to monitor developments on the global trade front…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Dividend Stocks

Invest $25,000 in This Dividend Stock for $536.90 in Annual Passive Income

This dividend stock is one of the best options for those looking to create income long term.

Read more »

chart reflected in eyeglass lenses
Stock Market

Seize the Dip: 2 Investment Opportunities to Grab Now

The tariff-induced market dip has created an opportunity to seize the opportunity to buy the dip in these investment trends.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

Where I’d Put $10,000 in Top Canadian Energy Stocks This April for Dividend Income

These three energy stocks are ideal for income-seeking investors, given their solid cash flows and consistent dividend growth.

Read more »

An investor uses a tablet
Dividend Stocks

This Could Be the Top Canadian Dividend Stock to Buy Right Now

Here's why I think Enbridge (TSX:ENB) remains a top option for dividend investors in this current macroeconomic climate.

Read more »