Restaurant Brands Stock Drops 6% After Earnings: Time to Buy?

RBI (TSX:QSR) stock saw shares drop 6%, despite beating earnings estimates, as macro issues continued to weigh on performance.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published February 13, 2024 8:15 pm EST

Geopolitical issues continued to weigh down companies across the globe this earnings season, and Restaurant Brands International (TSX:QSR) wasn’t immune. Despite beating earnings estimates, the fast-food retailer saw shares drop up to 6% after reporting earnings for the quarter.

What happened?

RBI stock beat Wall Street estimates for its quarterly results, with total revenue climbing 7.8% to $1.82 billion in the fourth quarter. This was higher than estimates that RBI stock would hit US$1.81 billion, up from US$1.69 billion the year before. Adjusted per share profit hit US$0.75, exceeding estimates of US$0.73 per share.

Net income for the fast food chain owner came in at US$726 million, or US$1.60 per diluted share, for the last three months of 2023. This was a solid increase from the US$336 million and US$0.74 per diluted share reported for the same quarter in 2022.

The increase came in part from larger income tax benefits and increased income from operations, which helped offset interest rate costs. Furthermore, RBI stock enjoyed a huge turnaround at its Burger King locations and continued demand for its Tim Hortons chains. So, it seems the revamp in Burger King, which started back in 2022 by remodelling locations, at least has been drawing in a larger crowd. This marked the first growth in traffic since 2021.

So, why the dip?

RBI stock joined several other international chains that cited the Israel-Hamas war as well as lower demand in China and some Western European markets for the drop. The Middle Eastern market, in particular, saw a drop in earnings from boycotts of brands supporting Israel or Palestine.

Add in that the cost of dining out continues to climb, and it’s a difficult time for RBI stock. The cost of dining out was up 5.1% in America in January compared to the same time last year. It also rose 0.5% compared to just the month before.

Comparable sales were down across the world for RBI stock. Growth in its international segment slowed to just 4.6%, compared to 10.5% at the same time last year. So, should investors get out amidst all this international turmoil?

Macro, not micro

The point that investors may want to focus on is that these are macro issues affecting companies across the board and across the world. Inflation will eventually come down. Interest rates as well. And the Israel-Hamas conflict will also one day come to an end.

So, what investors may want to point to are a few other things. For instance, I like the growth in Burger King locations. I also like that the company has focused back on what makes Tim Hortons a strong company to begin with, and that’s its basic menu. Further, I like that there continues to be high demand for Popeyes locations.

Where it might need work is with that lower demand in Europe and China. So, I’ll be interested in continuing to watch how RBI stock addresses this in the future. All that said, RBI stock is making the right moves and beating estimates. So, investors may want to consider buying the dip while they can.