RESTAURANT BRANDS INTERNATIONAL INC. $39 (New York symbol QSR, Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 467.0 million; Market cap: $18.2 billion; Price-to-sales ratio: n.a.; Dividend yield: 1.0%; TSINetwork Rating: Average; www.rbi.com) took its current form on December 12, 2014, after Burger King Worldwide (old symbol BKW) acquired Tim Hortons (old symbol THI).
The company is the world’s third-largest fast-food operator, after McDonald’s and Yum Brands, with 14,387 Burger King outlets and 4,724 Tim Hortons locations in 100 countries. Franchisees own and operate all of these restaurants.
If you assume the takeover occurred at the start of 2014, Restaurant Brands cut its loss to $8.1 million, or $0.04 a share, in the three months ended March 31, 2015, from $226.5 million, or $1.12, a year earlier.
Excluding merger-related costs and other unusual items, per-share earnings jumped 38.5%, to $0.18 from $0.13.
Sales crept up to $932.0 million from $931.6 million, but that’s because the high U.S. dollar cut the contribution from Restaurant Brands’overseas operations. Without the negative impact of exchange rates, sales gained 10.6%.
Same-store sales rose 5.3% at Tim Hortons, thanks to new menu items like Philly steak and cheese and crispy chicken sandwiches. Burger King’s same-store sales rose 4.6%, also due to new products, such as a spicy BLT sandwich, and special promotions.
The company had to borrow the cash it needed to buy Tim Hortons. That’s why its long-term debt of $9.1 billion is a high 50% of its market cap. However, Restaurant Brands recently refinanced some of these loans, which should cut its interest costs.
The stock is up 12% since the merger, but it’s expensive at 32.8 times Restaurant Brands’ likely 2015 earnings of $1.19 a share. The $0.40 dividend yields 1.0%.
Restaurant Brands International is a hold.
