Analyst Note
| Sean Dunlop |Narrow-moat Restaurant Brands International posted mixed first quarter results, despite $1.45 billion in sales and $0.64 EPS modestly exceeding our $1.38 billion and $0.57 expectations. The firm's international partnerships continue to represent a meaningful point of strength, with comparable store sales in the Burger King and Popeyes segments outpacing their U.S. counterparts by astounding margins of of 20.6% and 13.8%, respectively. Even held up against prepandemic results, the Burger King domestic business has seen three-year comparable store sales clock in at negative 0.8% (against 13.4% internationally), suggesting a long route to recovery for brand president Tom Curtis and crew. As we consider slightly slower than expected unit growth, driven by tangled supply chains and permitting delays, a protracted comparable store sales recovery in the Tim Horton's segment (this time driven by lockdowns in China) and slightly weaker supply chain profitability, we expect to trim our $66 and CAD 84 fair value estimates by a low-single-digit percentage. Shares look slightly undervalued.