RBI has been engaged in an arduous battle with Tim Hortons’ franchisees since it has moved to implement efficiencies and standards that have clashed with tradition. Tim Hortons has reported slow same-store sales growth in recent quarters, which inspired RBI to reveal its “Winning Together” initiative, which includes renovations at Tim Hortons’ locations. RBI released its third-quarter results on October 24.
System-wide sales growth improved at Tim Hortons, but still lagged far behind Burger King and Popeyes. Tim Hortons posted comparable sales growth of 0.6% compared to 0.3% in the prior year and posted net restaurant growth of 2.7% compared to 4.2% in Q3 2017. In comparison, Burger King and Popeyes reported system-wide sales growth of 7.8% and 7.9%, respectively, in the quarter. Tim Hortons is still well behind Burger King as the premier brand at RBI, and its base improvement translated to a lukewarm quarter for RBI.
Tim Hortons reported adjusted EBITDA of $298.9 million in the quarter compared to $294.1 million in Q3 2017. Burger King and Popeyes both suffered year-over-year declines in adjusted EBITDA. Adjusted net income was down marginally at RBI to $297.9 million, or $0.63 per share.
RBI announced the launch of its “Burger King of Tomorrow” initiative in the third quarter, which will aim to revamp its image across North America. Burger King has consistently been RBI’s top brand, demonstrating amazing consistency across quarters. Meanwhile, RBI reported that Popeyes’ restaurant count raised above 3,000, which is part of its domestic and international expansion initiative that has yielded success in consecutive quarters.
RBI stock isn’t enticing even after its steady mid-summer decline. The stock boasts an RSI of 50, which puts it in middling territory even immediately following one of the worst global sell-offs in years. Price-to-book and price-to-sales at RBI are both well below the industry average, which is concerning heading into 2019.
On the plus side, the board of directors maintained its quarterly dividend of $0.45 per share, representing a solid 2.7% yield.
Back in mid-August, I’d discussed how the evolution of the restaurant industry was largely positive for fast-food franchises. Younger generations have moved away from casual dining, but quick-serve and fast food restaurants are still popular among these demographics. Technology companies that offer food delivery service like UberEats and SkipTheDishes have also granted new avenues to fast food entities to connect to customers.
Should you buy RBI stock today?
Investors should stay on the sidelines rather than jump into shares of RBI in late November. The most recent quarter did not realize the kind of growth analysts wanted to see, but aggressive initiatives could pay off in quarters to come. This is one stock to keep on your watch list.