Few industries offer the tantalizing blend of tradition, innovation, and everyday indulgence quite like the restaurant sector. Among the key players in this dynamic field, Restaurant Brands International (RBI) has emerged as a beacon of success, boasting an impressive 9% top-line growth in the second quarter.
As the company prepares to unveil its third-quarter results, investors and industry enthusiasts alike are eagerly anticipating whether Restaurant Brands Stock can maintain its upward trajectory. In this blog post, we will explore valuable insights into the potential of restaurant brands stock.
Will Restaurant Brands Stock Deliver Another Strong Quarter After 9% Top-Line Growth in Q2?
Restaurant Brands International Inc. (NYSE: QSR) is one of the world’s largest and most influential fast-food restaurant chains. With a diverse portfolio that includes Burger King, Tim Hortons, Popeyes, and more recently, Firehouse Subs, Restaurant Brands has established a global presence. As the company approaches its fiscal third-quarter results, investors are keen to gauge its performance and prospects.
Expanding the Horizons
In Q2, Restaurant Brands International reported a net restaurant growth of 4.1%, with the Popeyes brand leading the charge in percentage increase. This expansion is a testament to the company’s ability to foster growth across its brands. The revenue generated by QSR is closely tied to its system sales, which can be boosted by increasing restaurant sales and expanding the number of restaurants. When we look at the international markets, we see that Tim Hortons, Popeyes, and Firehouse Subs have far less penetration than giants like McDonald’s or Burger King. This means there is ample room for Restaurant Brands to open new restaurants and a longer runway for revenue growth.
QSR’s stock has seen relatively minor fluctuations, hovering around $60 in early January 2021 and maintaining its value. This stability is in stark contrast to the broader market’s turbulence. However, QSR stock’s performance has been quite volatile compared to the S&P 500. In 2021, it returned -1 %, followed by a 7% return in 2022 and 4% in 2023. In comparison, the S&P 500 exhibited returns of 27% in 2021, -19% in 2022, and 9% in 2023. This data reveals that QSR underperformed the S&P 500 in 2021 and 2023.
Challenging the Market Giants
Outperforming the S&P 500 has been challenging for individual stocks in recent years. Even heavyweight companies in the Consumer Staples sector, such as WMT, PG, and COST, as well as tech giants like GOOG, TSLA, and MSFT, have struggled to beat the market consistently. However, the Trefis High-Quality Portfolio, consisting of 30 carefully selected stocks, outperformed the S&P 500 yearly during the same period. This portfolio provided better returns with less risk, making it a compelling option for investors seeking stability in uncertain economic conditions.
Future Prospects for QSR
The current macroeconomic environment presents challenges, including high oil prices and elevated interest rates. Given the past underperformance of QSR in 2021 and 2023, investors may be concerned about its performance in the next 12 months. Will Restaurant Brands International Inc. continue to face challenges, or will it see a strong upturn? Let’s delve into what we can expect from QSR’s Q3 results.
Revenues Expected to Exceed Consensus Estimates
Trefis estimates that QSR’s Q3 2023 revenues will be approximately $1.9 billion, slightly surpassing the consensus estimate. In the previous quarter, Q2, the company recorded a remarkable 9% year-over-year revenue growth, amounting to $1.8 billion. This growth was driven by robust same-store sales across all its segments, with consolidated comparable sales rising nearly 10% in Q2.
Tim Hortons Canada led the way with an 11% growth, followed by a 10% growth in Burger King, a 6% increase at Popeyes, and a 2% growth at Firehouse Subs. It’s important to note that only locations open for at least 13 months are included in the same-store sales metrics. For 2023, we anticipate QSR’s revenues to grow by 8%, reaching $7.1 billion.
Earnings Per Share Expected to Exceed Consensus Estimates Marginally
QSR’s Q3 2023 earnings per share are anticipated to come in at 88 cents, according to Trefis’ analysis, slightly surpassing the consensus estimate. In Q2, the company’s net income increased from $346 million to $351 million year-over-year, resulting in a 4% growth in earnings per share, reaching $0.85. Furthermore, adjusted EBITDA rose by 10.3% year-over-year to $665 million, with all four segments experiencing an increase.
Stock Price Estimate Higher than the Current Market Price
Trefis’ valuation of Restaurant Brands International suggests a target stock price of $75, approximately 12% higher than the current market price. This estimation is based on an earnings per share forecast of around $3.26 and a P/E multiple of 23.1x for fiscal 2023. To gain a better perspective, it’s beneficial to compare QSR with its peers, which can be found in the QSR Peers analysis.
Restaurant Brands International Inc. has demonstrated its ability to thrive in the fast-food industry with a diverse portfolio and a commitment to expanding its global footprint. The company’s Q3 earnings are eagerly awaited by investors, who are looking for signs of continued growth and success.
With a track record of solid revenue growth, an expected earnings beat, and a promising stock price estimate, Restaurant Brands International Inc. is poised to deliver another strong quarter and may offer an attractive investment opportunity for those seeking stability and growth in a dynamic market. As we eagerly await the results on Friday, November 3, it’s clear that QSR’s stock has the potential to outperform expectations once again.
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