Burger King Worldwide (BKW) Beats Earnings Estimates, Despite a Steep Plunge in Profit

Burger King Worldwide (BKW: Charts, News), which went public in June, posted an 83% plunge in profit this week due to restructuring charges and unfavorable foreign exchange rates. The company, which was taken private in October 2010 and restructured prior to its IPO, posted earnings of 2 cents per share, or $6.6 million, down from the 11 cents per share, or $38.8 million, it posted in the prior year quarter.

Excluding one-time charges, Burger King posted a profit of 17 cents, a penny higher than the 16 cents per share it posted last year on the same basis. Analysts were expecting 15 cents per share. Revenue slid 26% to $451.1 million, while organic revenue, which excludes acquisitions, divestitures and foreign exchange rates, grew by an anemic 0.2%. Analysts had been expecting revenue of $439.85 million. Same-store sales across the company rose 1.4%, and system-wide sales grew 3.9%. However, profit margin dropped to 11.6%, down from 12.4% last year. Daily Chart
Burger King was originally taken private by private equity firm 3G Capital Management in 2010 for $3.3 billion - a 46% premium to its trading price at the time. 3G eventually made a deal with U.K investment firm Justice Holdings for $1.4 billion to take the company public again. After the IPO, 3G remains Burger King's largest shareholder, with a 71% stake. The complex deal, in which 3G apparently overpaid for Burger King only to allow it to go public less than two years later, has raised concerns with some analysts, who believe that the same problems that nearly bankrupted the company prior to 2010 are still plaguing it today. Burger King has been attempting to revamp its menu and marketing strategy in an effort to reach a wider demographic than its traditional customers of men in the their early 20s. Burger King's new menu focuses on salads, fruit smoothies and chicken wraps, as opposed to its traditional burgers and fries. Restaurants have also been redesigned and renovated, following its rival McDonald's (MCD: Charts, News) lead. Burger King management has stated that these changes have contributed to an increase in store traffic and sales volume during the quarter. However, Burger King acknowledged difficulties ahead, expecting "more-challenging prior-year comparisons and the loss of some value-based traffic." In an effort to cut costs, Burger King announced that it plans to sell the majority of its company-owned restaurants to franchisees, to follow the "asset light" model approach used by McDonald's and KFC and Pizza Hut parent company Yum Brands (YUM: Charts, News). By passing on most of the responsibilities of commodity costs and other expenses on to franchisees, the company expects to benefit from a steadier income stream from standard royalty fees. Burger King is also following its rivals overseas. Currently, nearly half of its stores are located in international markets. All of its overseas segments reported positive growth in the third quarter. Sales in its Asia-Pacific, Australia and China regions posted 2.7% growth in same-store sales. It also experienced strong growth of 2.7% in same-store sales in Latin America. Its EMEA (Europe, Middle East and Africa) segment reported 1.8% growth. In North America, Burger King reported a 1.6% increase. Burger King management also initiated a 4 cent quarterly dividend. The stock trades at 22.3 times forward earnings with a 5-year PEG ratio of 1.2. Other News About BKW Burger King 3Q Profit Plunges But Tops Street Burger King beats lowered Street expectations. Burger King Worldwide Q3 Net Profit Falls Burger King posts a steep plunge in earnings. Other Stocks in the News EBay Cutting 325 Jobs in PayPal Division Restructuring Plan EBay is shrinking down PayPal to cut costs. Penguin Books, Random House merger creates giant Two old-time publishers combine to tackle Amazon. Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Oct 30, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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