Key Morningstar Metrics for Restaurant Brands International
- Fair Value Estimate: C$101.00
- Morningstar Rating: ★★★
- Morningstar Economic Moat Rating: Narrow
- Morningstar Uncertainty Rating: Medium
What We Thought of Restaurant Brands International’s Earnings
Restaurant Brands International QSR had 5.3% systemwide and 2.4% comparable sales growth in the second quarter. Tim Hortons (45% of revenue) posted 3.4% comparable sales growth. RBI’s adjusted operating margin fell 270 basis points to 27.7%, but its adjusted earnings per share rose to $0.94 from $0.86.
Why it matters: RBI leaned on its Tim Hortons and international segments as comparable sales remained weak at Burger King, Popeye’s, and Firehouse Subs. Despite heavy competition, we believe RBI’s remodeling, refranchising, and global expansion efforts will significantly boost sales and margins.
- RBI’s results were mixed, as its systemwide and comparable sales beat our respective 3.4% and 2.0% estimates, but adjusted operating margin and EPS missed by 30 basis points and $0.09, respectively. Given the ongoing transformation, we don’t regard these shortfalls as significant.
- RBI reiterated its algorithm for the 2024-28 period for comparable sales growth of at least 3% and organic adjusted operating income growth of at least 8%. Although currently off-track, we anticipate further margin gains and comparable sales growth above 3% beginning in 2026.
The bottom line: We don’t expect to make any material changes to our fair value estimate. Shares are slightly undervalued after falling 5% on Aug. 7. We believe investors are focused on mediocre current results rather than long-term opportunities.
- The Carrols’ refranchising efforts began in the quarter, two years earlier than expected. With new management and remodels, these units outperform the broader Burger King system and peers.
Key stats: Beef prices rose nearly 20% in the first half of 2025 as drought conditions have affected supply. As the market is cyclical, we believe prices will decline to the benefit of Burger King US (beef is about 25% of commodity cost).
- Coffee prices have fallen from historic highs, which should benefit Tim Hortons (which buys forward) in the second half of 2026.
