Restaurant Brands International Inc. QSR is set to report first quarter 2015 results on Apr 27, before the market opens. This is the second reporting quarter for this quick service restaurant company since it began operations on Dec 11, 2014. Last quarter, it posted a negative earnings surprise of 965.38%. Let’s see how things are shaping up for this announcement.
Headquartered in Miami, FL, Restaurant Brands came into existence with the merger of Tim Hortons Inc. and Burger King Worldwide Inc. It is now the parent company of these two iconic quick service restaurant brands. These independently operated brands have been serving their customers for more than 50 years.
Factors to Consider
Comps at both brands – Tim Hortons and Burger King – showed considerable year-over- year improvement it’s the fourth quarter of 2014 – the first earnings results for Restaurant Brands. Sales boost initiatives like menu innovation, re-imaging and premium offerings aided comps.
However, total operating expenses significantly increased in the last quarter. Costs incurred to execute the sales boost initiatives are possibly taking a toll on the profits of the company. Also, costs incurred to establish both the brands in new markets are also possibly denting profits. Also the company incurred huge interest expenses. These costs are expected to remain high in the soon-to-be reported quarter as well.
Like other food and restaurant companies, rising food costs pose a major challenge for Restaurant Brands. Meanwhile, inclement weather in the first quarter of the year and soft consumer spending would hurt traffic at the company’s outlets.
Earnings Whispers
Our proven model does not conclusively show that Restaurant Brands is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: The Earnings ESP stands at 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 14 cents.
Zacks Rank: Restaurant Brands has a Zacks Rank #5 (Strong Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement.
Stocks to Consider
Here are some companies in the restaurant sector that investors may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Sonic Corp. SONC with an Earnings ESP of +2.78% and a Zacks Rank #1 (Strong Buy).
Jack in the Box Inc. JACK, with an Earnings ESP of +1.52% and a Zacks Rank #2 (Buy).
Red Robin Gourmet Burgers Inc. RRGB has an Earnings ESP of +4.55% and a Zacks Rank #2.
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