Finally, I believe Burger King’s business could be positively affected by potential synergies from 3G Capital’s ownership of Heinz Ketchup. This is a huge wild card that has no downside but a tremendous amount of potential upside. Having worked at Burger King under the 3G Capital leadership, I am confident that no other party could leverage the collective value of the Burger King and H.J. Heinz brands better than 3G.
How much experience did I have at Burger King? For one, the head count reduction at headquarters became so dramatic that a handful of us worked with the 30 year-old grandson of 3G Capital’s founder, myself included.
Broader Quick-Service Restaurant Industry
Competitors McDonald’s Corporation (NYSE:MCD) and Yum! Brands, Inc. (NYSE:YUM) have both reported quarterly earnings in recent weeks.
McDonald’s posted fourth quarter earnings on Jan. 23, earning $1.38 per share on $6.95 billion in revenue. Both figures were higher than analyst estimates. While CEO Don Thompson stated the company has “plenty of room to grow,” he spoke of a tough consumer environment internationally, particularly in Germany, which is the European continent’s largest economy.
Research analysts at Sanford Bernstein expressed caution on McDonald’s following the company’s latest results, and the New York firm believes that 2013 comparable store sales could miss consensus estimates. Sanford Bernstein went as far to state that McDonald’s is fairly valued at current levels and the company could face greater competition in the New Year. System-wide comparable sales at McDonald’s grew a fractional 0.1% during the fourth quarter, compared to 2.7% at Burger King.
Yum! Brands also expressed limited visibility when the company reported fourth quarter results on Feb. 4. China same-store sales were down 6% during Q4, and Yum! dramatically lowered its full-year 2013 forecast. CEO David Novak said he no longer expects to achieve earnings per share growth during 2013, causing the stock to be downgraded at both Goldman Sachs and R.W. Baird. Goldman Sachs lowered its price target to $63 from $77 while Baird lowered to $60 from $72.
Foolish Bottom Line
Burger King’s turnaround is real, and the company has the wind to its back going into 2013 at a time when competitors McDonald’s and Yum! Brands are beginning to lose steam. 3G Capital’s recently announced acquisition of H.J. Heinz is unquestionably positive for Burger King, and could ultimately surprise investors in a big way. I also believe Burger King could become the de-facto “beta play” in the quick-service restaurant space as investors look for new areas of growth.
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The article Heinz Ketchup: Only Available on a Whopper Sandwich? originally appeared on Fool.com and is written by John Macris.
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