Earnings roundup : Burger King’s turnaround continues

Burger King Holdings Inc. posted a fourth-quarter profit Friday versus a loss a year earlier, fueled by strong late-night and breakfast sales and flashy marketing as it completed its first year as a publicly traded company. Full-year profit rose more than five-fold to $148 million.

Burger King expanded its hours, added a breakfast value menu, opened hundreds of new restaurants and set records in sales over the past year, more signs of improvement in a company that was struggling earlier this decade.

John Chidsey, chief executive of the world’s No. 2 hamburger chain, said he wants to double Burger King’s net restaurant openings and post a double-digit profit increase in 2008 — but it must effectively manage food costs and fight stiff competition for restaurant diners.

“Our momentum continues across all our business drivers — marketing, products, development and operations … making fiscal (2007) a record year,” Chidsey said on a conference call.

Despite the optimism, shares fell 86 cents, or 3.4 percent, to $24.06 Friday.

The drop surprised Lehman Brothers analyst Jeff Bernstein, who attributed it to confusion over fiscal year 2008 guidance.

Bernstein said Burger King’s 2008 outlook was in line with long-term estimates, excluding unusual items. The outlook included a 12 percent to 15 percent jump in net income and a substantial increase in capital expenditures.

“We still believe this is a strong turnaround story,” said Bernstein. Lehman Brothers has provided investment banking services for Burger King during the past year.

For the three months ended June 30, Burger King earned $36 million, or 26 cents per share, versus a loss of $10 million, or 8 cents per share, a year ago. Sales rose 11 percent to $590 million from $533 million a year ago.

Analysts polled by Thomson Financial had expected an average of earnings of 27 cents per share on sales of $580.4 million.

Burger King said worldwide comparable sales were up 4.4 percent for the quarter and 3.4 percent for the fiscal year.

“H. J. Heinz Co. said Friday its fiscal first-quarter earnings grew 6 percent, driven by double-digit growth in ketchup, beans, soups and Smart Ones meals, and the ketchup maker raised its outlook for the full year.

Net income rose to $205.3 million, or 63 cents per share, from $194.1 million, or 58 cents per share, a year ago. Sales climbed 9 percent to $2.25 billion for the quarter ended Aug. 1 from $2.06 billion in the prior-year period.

Analysts surveyed by Thomson Financial expected profit of 63 cents per share on revenue of $2.23 billion. Last week, Heinz said it anticipated first-quarter earnings of 62 to 63 cents per share, compared with Wall Street’s consensus estimate of 55 cents per share.

Shares rose 21 cents to $45.43 Friday.

“After seven straight quarters of earnings erosion, Gap Inc. reported after the markets closed Thursday that its second-quarter profit surged 19 percent. Net earnings for the quarter ended Aug. 4 were $152 million, or 19 cents per share, compared with $128 million, or 15 cents per share, in the year-ago period.

Its shares rose $1.11, or 6.4 percent, to $18.51 Friday.