NEW YORK (TheStreet) -- Restaurant Brands International (QSR - Get Report) stock closed down 1.76% to $31.82 on heavy trading volume on Friday after its price target was cut to $34 from $43 at Credit Suisse, which maintained a "neutral" rating on the parent company of Burger King and Tim Hortons.
On Thursday, the company announced a franchise agreement with Ampex Brands of Columbus and Dayton to expand the Tim Hortons brand in Central Ohio with an undisclosed number of existing and new locations.
If the agreement is similar to the one made with Seven Invest, then Tim Horton's growth is less than expected, Credit Suisse said in an analysts note this morning.
Seven Invest agreed to develop more than 150 Tim Horton locations over the next decade.
With this model, the franchise would grow by 30 to 60 units a year, well below estimates of 120 to 300 units a year by 2017, analysts added.
Restaurant Brands could also face increasing competition from strong sales trends at McDonald's (MCD), analysts noted.
By the end of the trading day, 3.25 million shares of Restaurant Brands had exchanged hands, compared with its average daily volume of 1.32 million shares.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate RESTAURANT BRANDS INTL INC as a Hold with a ratings score of C. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity and generally higher debt management risk.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- QSR's very impressive revenue growth greatly exceeded the industry average of 1.1%. Since the same quarter one year prior, revenues leaped by 265.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 598.3% when compared to the same quarter one year prior, rising from -$23.50 million to $117.10 million.
- 48.06% is the gross profit margin for RESTAURANT BRANDS INTL INC which we consider to be strong. Despite the high profit margin, it has decreased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 11.48% trails the industry average.
- Currently the debt-to-equity ratio of 1.84 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Even though the debt-to-equity ratio is weak, QSR's quick ratio is somewhat strong at 1.11, demonstrating the ability to handle short-term liquidity needs.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Hotels, Restaurants & Leisure industry and the overall market, RESTAURANT BRANDS INTL INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: QSR