Restaurant Brands (QSR) Q1 Earnings: Another Beat In Store?

We expect Restaurant Brands International Inc. (NYSE:QSR) to beat expectations when it reports first-quarter 2017 numbers on Apr 26, before the opening bell.

Last quarter, Restaurant Brands posted a positive earnings surprise of 4.76%. In fact, the company’s earnings surpassed the Zacks Consensus Estimate in each of the past seven quarters, with the trailing four-quarter average earnings surprise coming in at 19.20%.

It is to be noted that headquartered in Miami, FL, Restaurant Brands came into existence with the merger of Tim Hortons Inc. and Burger King Worldwide Inc. Currently, it is the parent company of these two iconic quick-service restaurant brands that have been serving customers for more than 50 years independently.

Let’s see how things are shaping up prior to this announcement.

Restaurant Brands International Inc. Price and EPS Surprise

Restaurant Brands International Inc. Price and EPS Surprise | Restaurant Brands International Inc. Quote

Why a Likely Positive Surprise?

Our proven model shows that Restaurant Brands is likely to beat earnings because it has the perfect combination of the two key ingredients.

Zacks ESP: Restaurant Brands has an Earnings ESP of +5.71%. This is because the Most Accurate estimate is 37 cents, while the Zacks Consensus Estimate is pegged lower at 35 cents. A favorable Earnings ESP serves as a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Restaurant Brands currently holds a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

The combination of Restaurant Brands favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.

What is Driving Better-than-Expected Earnings?

The company has been witnessing comps growth at both the brands – Tim Hortons and Burger King – in the last few quarters backed by menu innovation, improved restaurant operations, re-imaging and promotional offerings. We expect these sales-boosting initiatives to aid first-quarter results as well.

Also, we are encouraged by the company’s augmented focus on enhancing guest experience and increasing franchisee profitability to create value for all of its stakeholders. Moreover, Restaurant Brands’ efforts to grow global restaurant footprint at both its iconic brands should further drive the quarter’s performance.

However, rising costs along with negative currency translation is likely to dent the quarter’s profitability, while a soft consumer spending environment in the U.S. restaurant space might limit revenue growth.

Other Stocks to Consider

Restaurant Brands is not the only company looking up this earnings season. Here are some other companies to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) has an Earnings ESP of +17.24% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Priceline Group Inc. (NASDAQ:PCLN) has an Earnings ESP of +2.06% and a Zacks Rank #3.

Panera Bread Company (NASDAQ:PNRA) has an Earnings ESP of +1.09% and a Zacks Rank #3.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>