Carrols Restaurant Group, Inc. (TAST) announced third-quarter 2018 results on Tuesday. The country's largest Burger King franchiser delivered modest growth despite weather-related challenges, highlighting the relative strength of the popular fast-food brand and a number of significant restaurant acquisitions.

Still, Carrols stock has fallen around 10% since its release hit the wires. Let's take a closer look at what the company accomplished over the past quarter, as well as what we should be watching for the rest of the year.

Burger King Restaurant


Carrols Restaurant Group results: The raw numbers


Q3 2018

Q3 2017

Year-Over-Year Change

Restaurant sales

$296.9 million

$285.2 million


GAAP net income

$3.6 million

$2.8 million


GAAP earnings per share




DATA SOURCE: CARROLS RESTAURANT GROUP. GAAP = generally accepted accounting principles.

What happened with Carrols Restaurant Group this quarter?

  • On an adjusted (non-GAAP) basis, which excludes items like stock-based compensation and acquisition expenses, Carrols' net income grew 15% year over year, to $4 million, or $0.09 per diluted share.
  • Comparable-restaurant sales grew 1.6% -- decelerating from 5% growth last quarter -- albeit on top of a 7.5% increase in last year's third quarter and including a 0.5% negative impact from Hurricane Florence. This total included a 2.1% increase in average check size and a 0.5% decline in traffic.
  • At the end of the quarter, Carrols owned and operated 838 Burger King restaurants, up from 807 last quarter.
  • Carols acquired 43 restaurants between late August and early October, including two locations in Detroit, Michigan, 30 locations in Virginia, one in West Virginia, eight in South Carolina, and two in Georgia.
  • Adjusted EBITDA climbed 8.7%, to $26.3 million. Adjusted EBITDA margin rose 38 basis points, to 8.9% of restaurant sales.
  • Restaurant-level EBITDA increased 10.2% year over year, to $41.6 million.

What management had to say

Carols Restaurant Group CEO Daniel Accordino stated:

We view our 1.6% increase in third quarter comparable restaurant sales positively considering the approximate 0.5% negative impact from Hurricane Florence and the formidable 7.5% comparison from the prior year. [...] We were further encouraged that Adjusted EBITDA growth of 8.7% and Adjusted net income growth of 15%, respectively, outpaced top line growth of 4.1%. We continue to expand Carrols through both opportunistic acquisitions and organic growth. So far this year, we have purchased 44 BURGER KING restaurants and opened six new locations. We are now working diligently to instill operational best practices into our newest additions to our portfolio while also continuing to evaluate opportunities for future acquisitions and development.

Looking forward 

For all of 2018, Carrols now expects total restaurant sales in the range of $1.17 billion to $1.18 billion -- up $10 million from the lower end of its previous range -- assuming a comparable-restaurant sales increase of 3.2% to 3.8% (narrowed from 3% to 4% previously), with the latter range assuming comparable sales will be flat to up 2% in the fourth quarter. Carrols continues to expect full-year 2018 adjusted EBITDA of $100 million to $105 million.

All told, the market is understandably frowning upon Carrols' tepid comparable-sales growth this quarter. But I think the company is right to remain optimistic for the health of the Burger King brand, considering that the underlying cause of its traffic decline, in particular, was largely driven by circumstances out of its control. As such, and as the company continues to pursue both organic and acquisitive growth, I don't think patient, long-term investors should lose any sleep over Carrols' post-earnings decline.