Restaurant Brands International Inc (TSX:QSR)(NYSE:QSR) released its first-quarter results on Monday. Adjusted per-share earnings of 55 cents came in below the 58 cents that was expected by analysts. The stock was down as much as 4% in trading on the day as investors were unimpressed with the results. Restaurant Brands had been trading near its 52-week high heading into earnings after climbing 25% since the start of the year.
Concerns surrounding the company’s growth resurfaced as same-store sales numbers were not as strong as they were in the prior year. Tim Hortons, in particular, saw sales in existing stores decline by 0.6%. Growth has continued to be a problem for the coffee shop despite the previous quarter showing some signs of life.
For the entire company, sales were flat and there wasn’t any noticeable improvement from the prior year. Pre-tax profits of $302 million were up slightly from $281 million a year ago but the improvement was negated by higher income tax expenses.
Although the quarter wasn’t a bad one for the company, it also didn’t give investors much to get excited about. It reinforced the need for Restaurant Brands to focus on Tim Hortons for its growth as it has much fewer locations around the world than Burger King and has a lot more potential to increase its sales by tapping into new markets.
Restaurant Brands is a good long-term buy but because the stock trades at 10 times its book value and more than 25 times earnings, investors might be better off waiting for the stock to drop in price before adding it to their portfolios.
