Restaurant Brands Earnings: Global Systemwide Sales Growth Encouraging, Modest Development Hiccup

Narrow-moat Restaurant Brands International posted OK third-quarter earnings results, with $1.84 billion in sales and $0.79 in diluted EPS narrowly missing our $1.87 billion and $0.83 estimates. While development remains a near-term challenge—the firm expects 4% unit growth in 2023 and 5% in 2024, with the latter falling a bit below our preprint 5.5% estimate—we view this as a cyclical rather than structural factor, largely attributable to a handful of geopolitical issues and elevated interest rates. While shares traded down on the report (falling 4%-5%) as the firm missed consensus sales expectations, we remain optimistic regarding its long-term prospects and expect to increase our $70 and CAD 95 intrinsic valuations by a low-single-digit percentage as we balance time value, stronger-than-anticipated Burger King results, and slower near-term development. Shares look modestly undervalued.