Franchisee Profit Takes Center Stage Going Forward For Restaurant Brands, Says Analyst - Restaurant Brands Intl (NYSE:QSR)

Morgan Stanley analyst Brian Harbour reiterated an Equal-weight rating on the shares of Restaurant Brands International Inc QSR with a price target of $74.
In the fourth quarter, QSR's main KPIs were strong, said the analyst, which is encouraging evidence of ongoing improvement in its main markets.
These included BK U.S. and TH Canada comps ahead of expectations, international impacted by China but appeared solid elsewhere, and a strong quarter for development was visible as well, with ~750 net openings and acceleration at TH and PLK becoming visible and helping offset BK Int'l, still dragged down by China and Russia, added the analyst.
Tim's supply chain and BK were the drivers of the 4Q miss, partly a mis-modeling, but it appears some of Tim's margin headwinds will continue for longer as high-cost inventory is worked through, said the analyst.
Bad debt expense and lower JV income were also among the pressures on 4Q EBITDA, remarked the analyst.
On the other hand, G&A growth should moderate largely as the analyst expected in '23,and the company didn't signal additional G&A investment required and the analyst sees some SSS upside for the primary markets into '23 relative to previous expectations.
It's unclear to the analyst what news comes out of next week's investor event, and the CEO change elevates a known internal leader rather than bringing in a new face.
The analyst expects more detail on some of the specific initiatives to improve profitability and perhaps more color on the franchisee base and key development drivers.
Franchisee turnover was very specifically noted on the call, aiming to focus on better operators willing to invest, a long-term positive for the system, said the analyst.
Price Action: QSR shares are trading lower by 1.26% at $65.77 on the last check Wednesday.

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