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What: Shares of Burger King parent Restaurant Brands International rose as much as 11% on Tuesday after the company announced fourth-quarter results that showed solid revenue growth. Shares closed the day up more than 8% from the previous close.
So what: Restaurant Brands International, or RBI, is the product of the merger between Burger King Worldwide and Canadian coffee chain Tim Hortons; the deal closed in mid-December.
The market (rightly) overlooked the red ink at the bottom of RBI's profit and loss statement for the fourth quarter -- this resulted from costs related to the merger. Instead, and in the absence of future guidance from RBI management, investors focused on the top line.
The merger apparently did nothing to slow the two brands: Burger King comparable sales grew 3% year over year in the fourth quarter, while Tim Hortons outdid the king with 4.1% growth. Systemwide, revenue growth hit 7.4% and 7.7%. Those numbers compare very favorably to those of Burger King archrival McDonald's, which posted a 0.9% decline in comparable sales and a 1% decline in consolidated revenues.
Now what: While McDonald's struggles to find its "mojo," the combination of Burger King and Tim Hortons looks like a fast-food juggernaut. RBI is majority-owned by the Brazilian private equity firm 3G Capital, which has gained a much higher profile in the U.S. after teaming up with Warren Buffett to acquire H.J. Heinz. In their capable hands, there is no reason not to expect further gains -- in terms of the businesses and the stock.
The article Why Shares of Restaurant Brands International Popped Tuesday originally appeared on Fool.com.
Alex Dumortier, CFA, has no position in any stocks mentioned. The Motley Fool recommends McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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