Restaurant Brands Shares Surge on Strong 4Q Profit

Restaurant Brands International Inc shares surged after it reported a strong 4th quarter profit, boosted by strong sales of Burger King’s new menu items and affordable burgers.

Restaurant Brands shares rose 6.09% to close at $59.96 in New York after they hit the biggest intraday rise since February 2016 by 8.3% to $61.17. The company’s shares had risen 11% in the past year through Friday.

The company, which owns Burger King, Tim Hortons, and Popeye’s, said that net income in the 4th quarter grew to $395 million, or $1.59 a share, up from $118.4 million, or 50 cents a share, in the year-earlier period.

Excluding one-time items, it earned 66 cents per share, beating analysts’ average estimate of 57 cents.

For the 4th quarter, revenue was $1.2 billion, up from $1.1 billion in 2016. Total revenue for the year reached $4.6 billion, up from $4.2 billion in 2016.

Same-store sales at Burger King soared 4.6% in the quarter, nearly double the 2.5% that analysts had forecasted. For the whole year, its sales growth was 10.1%, thanks to net growth in a number of restaurants by 6.5%.

Total earnings before interest, taxes, depreciation, and amortization (EBITDA) were $903 million for the year ended December 31, 2017, a 10.6% increase over the previous year.

“We had good sales growth, driven primarily by Burger King,” Chief Executive Officer Daniel Schwartz said in an interview. He noted that the performance was aided by culinary innovation around the Bacon king and crispy chicken sandwiches, which performed particularly well, as well as value promotions.

He also praised the chain’s creative and “edgy” marketing.

“Headlines that these campaigns generated helped to successfully drive comparable sales,” Schwartz said.

Restaurant Brands’ other segments continued to struggle. The coffee and doughnut chain Tim Hortons’ sales growth was 0.1% in the final 3 months of last year. Popeye’s Louisiana Kitchen’s same-store sales dropped 1.3%, though the drop wasn’t as sharp as the estimated 1.5% fall.

The company blamed soft sales in the US and increased competition in the quick-service space for the weak sales at Tim Hortons during the quarter.

Recently, Restaurant Brands has introduced mobile applications and online ordering to attract more millennials to Tim Hortons and Burger King.

“The digital channel has been and will continue to be a key focus of ours as we grow the Tim’s brand,” said Schwartz.

Delivery is an area of potential growth, as well as another competitive space among fast-food chains. The company announced in January that Josh Kobza will become its chief technology and development officer, overseeing digital for all 3 of the company’s brands.

“We’re always looking at different ways of delivering our food,” Schwartz said. “It already is significant in some international markets.”

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