Tuesday, February 11, 2020

Popeyes’ Chicken Sandwich Makes Restaurant Brands Even Yummier

  • Dollar
  • Gold
  • Euro
  • Stocks
  • Oil
  • FTSE 100

What’s happening: Restaurant Brands International, the parent company of leading chains like Tim Hortons, Burger King and Popeyes, reported its fourth quarter results ahead of expectations.

What happened: Shares of Restaurant Brands attracted investor attention immediately after the company reported an earnings beat. The shares gave up most of their gains, however, during the after-hours session as investors dug deeper into the results.

  • Restaurant Brands reported fourth-quarter earnings of 75 cents per share, representing 10% and beating the consensus estimate of.73 cents per share.
  • The company announced 7% growth in quarterly sales to $1.48 billion, versus expectations of $1.46 billion.

The shares jumped almost 3% in Monday morning trade, but slid continuously following that to end the after-hours trading session up only 0.3%.

Why it matters: Restaurant Brands’ quarterly performance was driven by blowout growth at Popeyes. Popeyes was by far the best performer, with same-store sales growing a whopping 34.4%, handsomely beating the consensus estimate of 12.3% growth. And, this stellar performance can be attributed to a sandwich, made of fried chicken.

Launched nationwide in August last year, Popeyes chicken sandwich gained immense popularity following a Twitter feud that saw other chicken sandwich and fast-food chains join in. The chicken sandwich was sold out before the month ended! The restaurant chain relaunched the famous crispy chicken sandwich in November, leading to the chain’s excellent quarterly figures.

While the chicken sandwich did wonders for Popeyes, so much so that it drove rival McDonald's to test chicken sandwiches at some of its restaurants, there are concerns whether the stellar performance can be repeated.

On the other hand, the fast-food company’s other leading brands – Burger King and Tim Hortons – delivered a dismal performance in the fourth quarter. While Burger King recorded 2.8% growth, missing consensus estimates of 3.4%, Tim Hortons saw its same-store sales decline 4.3% in the quarter. In fact, the coffee chain could not up its game even with initiatives like remodeling stores, introducing new beverages and opening drive-throughs. Tim Hortons reeled under pressure from Starbucks and other coffee shops. Tim Hortons has now announced plans to launch non-dairy drinks like almond milk in spring.

What to watch: Restaurant Brands announced plans to construct 1,500 restaurants over the next ten years. With China contributing around 2% of systemwide Burger King sales, management is now looking to Popeyes to grow its presence in the Asian nation. Investors are looking to hear more from the company about its initiatives to revive Burger King and Tim Hortons as well as how the coronavirus has impacted the company, a subject that management eluded to during the latest earnings call.


Support & Resistances for Today

Technical Levels

News Sentiment

Gold - 1550 and 1610


GBP/USD - 1.282 and 1.303


DAX 30 - 13150 and 13650


Wall Street - 29050 and 29550


USD/JPY - 108.75 and 111.25



Markets Today

The US dollar will be the currency to watch today, after the greenback peaked to a four-month high versus the euro on Monday.

Context: As the coronavirus continues to spread with no cure in sight, elevated concerns over the global economic outlook are driving investors towards “safe-haven currencies.” On the other hand, data and political news from the Eurozone have failed to lend support to the euro.

Details: The greenback has been maintaining its strength against other major currencies, following positive US economic reports. The US dollar remained almost steady in Asian trading today, with investors waiting for details from Federal Reserve Chairman Jerome Powell’s testimony. Powell is scheduled to testify before Congress on Tuesday and Wednesday.

In another part of the world, Germany reported a big decline in its December industrial output. Political unrest in the country is another headwind for the Euro. Weak Eurozone investor confidence data also pushed the region’s currency to its lowest level in four months."

Why it matters: The US markets closed the session higher, with the Dow index climbing around 175 points yesterday. The Federal Reserve is upbeat on the country’s economic prospects, according to latest semi-annual monetary policy report. Following the Fed’s dovish stance, traders will be keeping an eye on US fundamentals and news related to the coronavirus outbreak.

What to watch: After the strong performance of the US dollar and markets in the previous session, all eyes are on Powell’s testimony. Investors will be looking for some positive comments from the Fed Chairman as the global economy prepares for a possible slowdown due to the coronavirus.

Other Markets: Most European indices are trading higher on Tuesday, with the FTSE 100, DAX 30, IBEX 35 and Stoxx 600 up 1.1%, 1.1%, 0.5% and 0.8%, respectively.


Market Snapshot

EUR/USD (1.0909, -0.01%)

Dow ($29,319, 0.25%)

Brent ($53.81, 1%)

GBP/USD (1.2906, -0.05%)

S&P500 ($3,360, 0.21%)

WTI ($50.06, 1%)

USD/JPY (109.91, 0.15%)

Nasdaq ($9,560, 0.35%)

Gold ($1,571, -0.5%)


News Shaping the Markets Today

  • US stock futures point to higher open
  • Asia stocks end mostly higher; Japanese Nikkei was closed today
  • European markets open higher
  • Canada reports growth in January housing starts
  • Australian business sentiment index rises to -1 in January


What else to watch today

Mexico’s industrial production, South African industrial production, US NFIB small business optimism index and JOLTS report, speeches from San Francisco Fed President Mary Daly, Federal Reserve Governor Randal Quarles, Federal Reserve Bank of St. Louis President James Bullard and Federal Reserve Bank of Minneapolis President Neel Kashkari.