Burger King and Tim Hortons parent-company Restaurant Brands International (RBI) experienced a sharp surge in their shares after the company posted better-than-expected fourth quarter earnings for 2016, along with reports of a possible acquisition of thefried chicken fast food company Popeyes Louisiana Kitchen.
RBI’s possible acquisition over Popeye’s was well-received and in turn resulted with bullish sentiments from the market as RBI’s stock (QSR) surged 4.63% at $53.8 on Monday. By Tuesday, RBI continued on with its strong rally, up by 1.36% or $0.73 to $54.53 after the session. Its market cap is currently at $25.15 billion, with a dividend yield of 1.32%.
Aside from the boost the company got from the buyout deal, RBI’s strong sales growth for the fourth quarter and full year 2016 contributed to the stock’s strong performance.
Throughout February, RBI stock was in the bull market, consistently displaying strong rallies session after session. According to RBI, shareholders can expect for a $0.18 dividend per common share by April 4.
Meanwhile, Popeye’s stock (PLKI) also experienced a brief surge on Monday session, reaching a high of $75.74 before closing at $70.82, after reports on RBI’s interest in the fast-food chain.
However, the gains slowly began to slow down the following session on Tuesday, plunging to a low of $65.66 before closing at $66.25, down by 6.45% or $4.57, when deal negotiations between the two companies was strongly opposed by some analysts, stating that Restaurant Brands is not yet ready for another acquisition and that RBI seemingly lost interest over Popeyes.
Burger King and Tim Hortons Posts Strong Sales
On Monday, Restaurant Brands International also released its quarterly and full year earnings report for the fourth quarter of 2016. The company was able to beat analyst estimates with higher EPS, revenues, and impressive sales growth both from Burger King and Tim Hortons.
During the fourth quarter, RBI saw a 5% YoY growth in its revenues at $1.11 billion, compared to the $1.05 billion revenue a year ago, while its operating income grew 32% at $440 million. Its diluted EPS was up to $0.50 versus the $0.25 year ago.
For the full year results, RBI saw a 16.4% increase for its adjusted EBITDA of $1.89 billion, while the adjusted diluted EPS grew 45% year-on-year to $1.58. RBI’s revenue was at $4.15 billion, compared to the previous year data of $4.05 billion.
Tim Horton reported a 5.2% system-wide sales growth, with global comparable sales growth of 2.5%.Its adjusted EBITDA also climbed 21.8% year-on-year on an organic basis to $1.07 billion.
Meanwhile, Burger King was up 7.8% for the system-wide sales, its net restaurant growth saw a 4.9% increase over the year with 2016 NRG of 735 units. BK’s adjusted EBITDA came in 10.1% higher year-on-year to $816 million.
RBI also reported BK’s development within the year with accelerated development agreements established with US partners, as well as a new MF formed in Belgium, which purchased Belgian Quick restaurants from France MFJV. For Tim Hortons, the cafe held its first openings in Minneapolis and Cincinnati and was able to establish 3 MFJVs in the Philippines, Great Britain and Mexico.
The fast-food parent company attributes its fourth quarter and full year growth of the system-wide sales growth both from Tim Hortons and Burger King, partially offset by unfavorable FX movements.
RBI’s Fast Food Takeovers
According to a report, the company has presented an acquisition proposal for the Popeyes Louisiana Kitchen. The possible purchase was a goal for RBI to further expand its market, as well as to be able to offer Popeye’s famous fried chicken and buttermilk biscuits worldwide.
There are no guarantees yet whether the proposal would go through and continue on a formal deal transactions or negotiations to fizzle out as both companies refused to comment on the matter at present.
However, As RBI is considering several acquisitions in the future, the proposal was likely made possible. Since chicken currently accounts for at least 10% of the fast food industry’s sales, the deal can have innovative results in the future. Should the negotiation go through, RBI can add fried chicken food choices to its portfolio of fast food chains, joining with Tim Hortons and Burger King.
Many analysts believe that there are more acquisitions and takeovers to come for Restaurant Brands International as its management continues to expand its businesses’ market presence as well as improve same-store sales growth.
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