Should You Buy, Sell, or Hold Restaurant Brands International Inc. Today?

Restaurant Brands International Inc.’s (TSX:QSR)(NYSE:QSR) stock has risen over 2% since it released fourth-quarter earnings this morning. Should you be a long-term buyer?

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The Motley Fool

Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR), one of the world’s largest quick-serve restaurant companies and the owner of Burger King and Tim Horton’s, announced fourth-quarter earnings this morning, and its stock has responded by rising over 2%. Let’s take a closer look at the quarterly results to determine if we should consider establishing long-term positions today, or if we should wait for a better entry point in the trading sessions ahead instead.

The fourth-quarter results are in

Here’s a summary of RBI’s fourth-quarter earnings compared to its results in the same period a year ago.

Metric Q4 2014 Q4 2013
Earnings Per Share ($2.52) $0.19
Revenue $416.3 million $265.2 million

Source: Restaurant Brands International

RBI reported a net loss of $514.2 million, or $2.52 per share, in the fourth quarter of fiscal 2014 compared to a net gain of $66.8 million, or $0.19 per share, in the year-ago period, and this large decline can be attributed to merger-related expenses following Burger King Worldwide’s $11 billion purchase of Tim Horton’s in 2014. Also, the company’s revenues increased an impressive 57% year-over-year, and this strong growth was helped by system-wide sales increasing 7.4% at Tim Horton’s and 7.7% at Burger King on a constant currency basis.

Here’s a quick breakdown of six other notable statistics and updates from the report compared to the year-ago period:

  1. Comparable-store sales increased 4.1% at Tim Horton’s.
  2. Comparable-store sales increased 3.0% at Burger King.
  3. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 23.1% to $224.2 million.
  4. Tim Horton’s adjusted EBITDA increased 10.2% to $208.6 million on a constant currency basis.
  5. Burger King’s adjusted EBITDA increased 8.8% to $189.1 million on a constant currency basis.
  6. RBI paid out a quarterly dividend of $0.30 per common share to Burger King shareholders for a total cost of approximately $106 million.

RBI opened 493 net new restaurants in the fourth quarter, including 412 net new Burger King restaurants and 81 net new Tim Horton’s. The company now operates a total of 19,043 restaurants in approximately 100 countries, and of these, 14,372 are Burger King restaurants and 4,671 are Tim Horton’s restaurants.

Is RBI a long-term buy today?

Restaurant Brands International is one of the largest quick serve restaurant companies in the world, and increased traffic at both of its iconic brands led it to a very strong fourth-quarter performance, and its stock has reacted accordingly by rising over 2%.

I think RBI’s stock represents an intriguing long-term investment opportunity today, even after the post-earnings rally, because I think the company has the potential to generate significant cost synergies over the next several years and because it will benefit from a lower tax rate by being based in Ontario, both of which will help boost earnings per share growth going forward. I think this will ultimately lead to a much higher stock price.

With all of this information in mind, I think Restaurant Brands International represents one of the best long-term investment opportunities in the restaurant industry today. Foolish investors should take a closer look and consider initiating positions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

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