Restaurant Brands International Earnings: Cautious Consumers Constrain Growth; Shares Not a Bargain

Narrow-moat Restaurant Brands International reported fiscal 2025 first-quarter results below our expectations, with $2.1 billion in revenue and $539 million in adjusted operating income trailing our $2.19 billion and $615 million estimates, respectively. We are also digesting revised full-year unit growth guidance (3% decline to 3% increase from around 5% growth previously), which was lowered due to anticipated restructuring actions following the company’s takeover of Burger King China, which we see as a prudent step to reorganize staffing and launch sales initiatives, while shuttering underperforming locations. On the positive side, a reduction in total segment general and administrative expenses (excluding the restaurant holdings segment) is expected to total an impressive $50 million at the midpoint (to $610 million from $660 million) on diligent cost management. Balancing these factors and accounting for recent currency movements, we plan to lower our $75 per share fair value estimate by a low-single-digit percentage and CAD 109 estimate by a mid-single-digit percentage, leaving both share classes as fairly valued.