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Here's Why Investors Should Retain Restaurant Brands (QSR) Now

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Restaurant Brands International Inc. (QSR - Free Report) is likely to benefit from a rise in comparable sales, unit growth and menu innovation. However, high costs remain a concern. Year to date, the company’s shares have fallen15.4%, compared with the industry’s decline of 20%. Let’s delve deeper.

Key Catalysts

Despite the coronavirus crisis, the company impressed investors with solid comps. During the first quarter of 2022, comps in the Tim Hortons (Canada) and Burger King (international business) reflected growth of 10.1% and 20.1%, respectively, on a year-over-year basis. The upside was primarily driven by solid promotions with respect to its core platform and a rise in delivery and digital sales.

The Zacks Rank #3 (Hold) company believes that there is a huge opportunity to grow all its brands around the world by expanding its presence in existing markets as well as entering new markets. Currently, it has more than 29,000 restaurants worldwide. During second-quarter 2021, the company opened the 400th Burger King store in France in association with its master franchisee, Groupe Bertrand. Restaurant Brands continues to evaluate opportunities to accelerate the international development of all the three brands by establishing master franchisees with exclusive development rights and joint ventures with new and existing franchisees. The company is very optimistic about growth opportunities in 2022 and remains on track to grow its restaurant base toward its long-term goal of 40,000 locations.

Restaurant Brands’ loyalty program, Tim's Rewards, has been gaining popularity. The company announced that following a rapid ramp-up phase, nearly half of the customers pay through Tim's Rewards. Restaurant Brands is presently testing a loyalty program in Canada across different markets as high loyalty card adoption rates have been witnessed in these test markets. During fourth-quarter 2021, monthly active users in the platform were 4.5 million, representing growth of 50% from the prior-year quarter’s levels. It plans to integrate loyalty cards into the digital channel, basically through its mobile app. During the first quarter of 2021, the company rolled out a new Royal Perks loyalty program at its Burger King restaurants. It unveiled a new digital-first loyalty program at Popeyes. In September, Restaurant Brands completed the nationwide in-store rollout of its Royal Perks loyalty program. The company is satisfied with the initial results of the loyalty program, with approximately 80% of registered digital guests now having transformed to Royal Perks.

The company has been focusing on expanding delivery via digital platforms amid the pandemic. Two years ago, the company had just a couple of hundred restaurants in North America on delivery. However, currently, it has more than 10,000 active restaurants across its three brands, with most offering delivery via the company’s digital platforms. Since February 2020, the company has added approximately 3,000 new restaurants to deliver in the United States and Canada. In Canada, the company provides delivery services from nearly 1,200 restaurants. During first-quarter 2022, Tims Canada generated more than 36% of its sales from digital channels. Burger King, Popeye's, and Firehouse Subs generated 9%, 18% and 30% of sales, respectively, through digital channels. The company’s performance has been primarily driven by attributes such as growth in delivery, an increase in mobile order and pay and continued traction in the loyalty program.

Zacks Investment Research
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Key Picks

Some better-ranked stocks in the Zacks Retail-Wholesale sector are MarineMax, Inc. (HZO - Free Report) , BBQ Holdings, Inc. (BBQ - Free Report) and Cracker Barrel Old Country Store (CBRL - Free Report) .

MarineMax sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 32.8%, on average. Shares of the company have declined 19.1% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MarineMax’s 2022 sales and EPS suggests growth of 16% and 21.5%, respectively, from the year-ago period’s levels.

BBQ Holdings carries a Zacks Rank #2 (Buy). BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have decreased 11.7% in the past year.

The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 46.1% and 67.6%, respectively, from the year-ago period’s levels.

Cracker Barrel carries a Zacks Rank #2. Cracker Barrel has a long-term earnings growth of 9.4%. Shares of the company have declined 34.8% in the past year.

The Zacks Consensus Estimate for Cracker Barrel’s 2022 sales and EPS suggests growth of 17.3% and 33.5%, respectively, from the year-ago period’s levels.

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