Market Overview

My goal is to be on stage with my computer and let you
see my screen and make sure you know what buttons to
press, where you’re getting in & out, how to calculate
risk, your targets — all of those things.
It’s real-life trading. Make sure you sign up!
- Jerremy Newsome
GET TICKETS

KeyBanc Explains Why Popeyes Unit Economics Matters

Share:
KeyBanc Explains Why Popeyes Unit Economics Matters

Restaurant chain Popeyes Louisiana Kitchen accounts for around 7 percent of Restaurant Brands International Inc (NYSE: QSR)'s total EBITDA and last week released a franchise presentation that shows some metrics are below pre-acquisition levels, according to KeyBanc.

The Analyst

KeyBanc Capital Markets' Eric Gonzalez maintains an Overweight rating on Restaurant Brands with a $72 price target.

The Thesis

Popeyes publicly released its 2019 franchise disclosure document (FDD), which includes multiple unit-level economic data readouts. Gonzalez said, for example, the document showed U.S. franchisee cash flows were flat-to-slightly-negative in 2018 but the research firm's estimates suggest slightly improved profitability last year.

Gonzalez said restaurant level operating profit excluding lease expenses are 130 to 150 basis points below 2015 and 2016 levels, likely due to sales deleverage and wage pressures.

Restaurant companies typically shy away from offering the type of information Popeyes disclosed, which prevents investors from fully understanding the overall health of the business. In Popeyes' case, investors should give management the opportunity to strike a balance between value and innovation to reverse poor trends moving forward.

The Popeyes brand remains "overlooked" by investors given its small size relative to sister brands like Tim Hortons and Burger King. The Popeyes brand is more likely to see international success across different cultures, however, and a 2018 master franchise agreement in Brazil could prove to be the first of many.

Price Action

Restaurant Brands traded around $65.63 per share Monday afternoon.

Related Links:

Piper Jaffray Applauds Restaurant Brands, Highlights Ongoing Momentum

McDonald's, Restaurant Brands, Chipotle Are Morgan Stanley's Top Restaurant Picks In Challenging Year For Sector

Latest Ratings for QSR

DateFirmActionFromTo
Jun 2019Initiates Coverage OnOutperform
May 2019MaintainsOverweight
May 2019DowngradesNeutralUnderperform

View More Analyst Ratings for QSR
View the Latest Analyst Ratings

Posted-In: Burger King Eric Gonzalez KeyBanc Capital Markets Popeye's Louisiana KitchenAnalyst Color Restaurants Analyst Ratings General Best of Benzinga

 

Related Articles (QSR)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ORCLMaintains59.0
ORCLMaintains61.0
FDXMaintains200.0
ORCLMaintains59.0
ACNMaintains186.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Best Sector ETFs For April: Trying Avoid April Showers

46 Stocks Moving In Monday's Mid-Day Session