It's Good to Be the King

Burger King (NYSE: BKC) and its vaguely creepy mascot cooked up another whopper of a quarter. The fast-food giant blew past Wall Street expectations on the back of resilient sales at the unit level. Then again, this shouldn't come as much of a surprise. The company didn't just nail its numbers three months ago -- BK has rattled off seven consecutive quarters of market-thumping performances, with an enviable 17-quarter streak of positive worldwide comps.

Revenue climbed 10% to $594 million. Net margins improved, helping prop up profits by 20%, to $0.20 a share. Silly analysts! They were looking for just a profit of $0.27 a share on $580 million in revenue. Will they ever truly know the King?

Period	EPS est.	EPS actual
Q1 2007	$0.26	$0.30
Q2 2007	$0.26	$0.28
Q3 2007	$0.22	$0.25
Q4 2007	$0.27	$0.29
Q1 2008	$0.33	$0.35
Q2 2008	$0.32	$0.36
Q3 2008	$0.27	$0.30

Source: Thomson.

Comps clocked in strong, rising 5.8% globally, or 5.4% in the United States and Canada. The company's hardly working off a base of depressed numbers here; these unit-level gains are stacked on top of four years of rising register rings.

Things aren't perfect throughout the company's kingdom of more than 11,400 restaurants, though. Margins at the restaurant level were pinched by the same high food costs that have plagued the hospitality industry. With 90% of the company's units franchised, the King's got to keep his franchisees happy.

Then again, franchisees are unlikely to overthrow royalty. A quick look around should give them plenty of motivation to stay put. Wendy's (NYSE: WEN) posted a 1.6% dip in comps, registering a sharp drop in earnings during the same period. McDonald's (NYSE: MCD) had a huge quarter, but it spooked investors with lower stateside comps during the month of March. CKE Restaurants (NYSE: CKR) posted healthy gains at its Carl's Jr. chain during the same period, but comps fell at Hardee's. Jack in the Box (NYSE: JBX) has a long streak of posting higher comps at its namesake chain, but its biggest growth spurts are coming from its Qdoba chain, which is angling to become the next Chipotle (NYSE: CMG) (NYSE: CMG-B).

BK's got to prove itself fallible -- eventually. But since it went public two years ago, the company has done little to disappoint investors. For now, it makes a lot more sense to roll with the King than to bet against the kingdom.