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Here's Why You Should Retain Restaurant Brands (QSR) Stock Now
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Restaurant Brands International Inc. (QSR - Free Report) is likely to benefit from strong comparable sales growth, digital efforts and strong Popeyes performance. Also, its focus on expansion efforts bodes well. However, elevated inflationary pressures are a concern.
Let us discuss the factors that highlight why investors should retain the stock.
Growth Catalysts
Restaurant Brands continues to impress investors with solid comps growth. In second-quarter 2023, the company’s consolidated comparable sales came in at 8.6% compared with 8.2% reported in the prior-year quarter. Comps in Tim Hortons (or “TH”), Burger King (“BK”) and Popeyes (“PLK”) came in at 11.4%, 10.2% and 6.3% compared with 12.2%, 8.7% and (1.4%) reported in the prior-year quarter, respectively. The upside was primarily driven by higher traffic, strengthening of core offerings, enhanced restaurant operations and pricing initiatives.
The company has been focused on expanding delivery via digital platforms amid the pandemic. During second-quarter 2023, digital sales increased 22% year over year, courtesy of solid contributions from kiosks and delivery. The company showcased strong digitalization efforts and continued to drive growth for its Tim Hortons brand, with 4.9 million average monthly users and a consistent digital sales mix of approximately 33% in the quarter. The company is optimistic about digital sales growth in international markets, backed by various service modes.
During second-quarter 2023, the company witnessed a solid top-line performance in its Popeyes brand. The upside was fueled by various factors, including the expansion of the chicken sandwich platform, the introduction of Ghost Pepper Wings, innovation in beverages and desserts and a substantial 22% surge in digital sales. In the United States, Popeyes reported a 4.2% rise in comparable sales, a 5.1% increase in net restaurants and a strong 9.4% growth in system-wide sales.
Restaurant Brands believes that there is a huge opportunity to grow all its brands worldwide by expanding its presence in existing markets and entering new markets. During second-quarter 2023, QSR opened 169 net new restaurants, contributing to a 4.1% year-over-year growth in the overall restaurant count. QSR initiated its global expansion, unveiling its first overseas Firehouse location in Zurich, Switzerland. The company is optimistic about growth opportunities in 2023 and is on track to grow its restaurant base toward its long-term goal of 40,000 locations.
Image Source: Zacks Investment Research
Shares of QSR have increased 14.7% in the past year compared with the industry's 8.4% rise.
Headwinds
The company has been persistently shouldering increased expenses, which have been detrimental to margins. In second-quarter 2023, total costs of sales came in at $612 million, up 4.8% from $584 million reported in the prior-year quarter. An increase in commodity, labor and energy costs mainly drove the upside. The industry players expect to witness higher costs due to labor and supply chain shortages for quite some time. For 2023, our model predicts the total cost of sales to increase 9.3% year over year to $2.5 billion. The company remains cautious of the current macroeconomic environment.
Zacks Rank and Key Picks
Restaurant Brands International carries a Zacks Rank #3 (Hold).
BJ's Restaurants, Inc. (BJRI - Free Report) sports a Zacks Rank #1 (Strong buy). The company has a trailing four-quarter earnings surprise of 121.2% on average. Shares of BJRI have increased 15.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 435.3% growth, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) sports a Zacks Rank #1. ANF has a trailing four-quarter earnings surprise of 724.8% on average. Shares of ANF have gained 97.7% in the past year.
The Zacks Consensus Estimate for ANF’s 2024 sales and EPS indicates a rise of 6.4% and 1032%, respectively, from the year-ago period’s levels.
Chuy's Holdings, Inc. (CHUY - Free Report) carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 26.6% on average. Shares of CHUY have increased 61% in the past year.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS indicate an increase of 9.5% and 32.9%, respectively, from the year-ago period’s levels.
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Here's Why You Should Retain Restaurant Brands (QSR) Stock Now
Restaurant Brands International Inc. (QSR - Free Report) is likely to benefit from strong comparable sales growth, digital efforts and strong Popeyes performance. Also, its focus on expansion efforts bodes well. However, elevated inflationary pressures are a concern.
Let us discuss the factors that highlight why investors should retain the stock.
Growth Catalysts
Restaurant Brands continues to impress investors with solid comps growth. In second-quarter 2023, the company’s consolidated comparable sales came in at 8.6% compared with 8.2% reported in the prior-year quarter. Comps in Tim Hortons (or “TH”), Burger King (“BK”) and Popeyes (“PLK”) came in at 11.4%, 10.2% and 6.3% compared with 12.2%, 8.7% and (1.4%) reported in the prior-year quarter, respectively. The upside was primarily driven by higher traffic, strengthening of core offerings, enhanced restaurant operations and pricing initiatives.
The company has been focused on expanding delivery via digital platforms amid the pandemic. During second-quarter 2023, digital sales increased 22% year over year, courtesy of solid contributions from kiosks and delivery. The company showcased strong digitalization efforts and continued to drive growth for its Tim Hortons brand, with 4.9 million average monthly users and a consistent digital sales mix of approximately 33% in the quarter. The company is optimistic about digital sales growth in international markets, backed by various service modes.
During second-quarter 2023, the company witnessed a solid top-line performance in its Popeyes brand. The upside was fueled by various factors, including the expansion of the chicken sandwich platform, the introduction of Ghost Pepper Wings, innovation in beverages and desserts and a substantial 22% surge in digital sales. In the United States, Popeyes reported a 4.2% rise in comparable sales, a 5.1% increase in net restaurants and a strong 9.4% growth in system-wide sales.
Restaurant Brands believes that there is a huge opportunity to grow all its brands worldwide by expanding its presence in existing markets and entering new markets. During second-quarter 2023, QSR opened 169 net new restaurants, contributing to a 4.1% year-over-year growth in the overall restaurant count. QSR initiated its global expansion, unveiling its first overseas Firehouse location in Zurich, Switzerland. The company is optimistic about growth opportunities in 2023 and is on track to grow its restaurant base toward its long-term goal of 40,000 locations.
Image Source: Zacks Investment Research
Shares of QSR have increased 14.7% in the past year compared with the industry's 8.4% rise.
Headwinds
The company has been persistently shouldering increased expenses, which have been detrimental to margins. In second-quarter 2023, total costs of sales came in at $612 million, up 4.8% from $584 million reported in the prior-year quarter. An increase in commodity, labor and energy costs mainly drove the upside. The industry players expect to witness higher costs due to labor and supply chain shortages for quite some time. For 2023, our model predicts the total cost of sales to increase 9.3% year over year to $2.5 billion. The company remains cautious of the current macroeconomic environment.
Zacks Rank and Key Picks
Restaurant Brands International carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Zacks Retail and Wholesale sector are:
BJ's Restaurants, Inc. (BJRI - Free Report) sports a Zacks Rank #1 (Strong buy). The company has a trailing four-quarter earnings surprise of 121.2% on average. Shares of BJRI have increased 15.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 435.3% growth, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) sports a Zacks Rank #1. ANF has a trailing four-quarter earnings surprise of 724.8% on average. Shares of ANF have gained 97.7% in the past year.
The Zacks Consensus Estimate for ANF’s 2024 sales and EPS indicates a rise of 6.4% and 1032%, respectively, from the year-ago period’s levels.
Chuy's Holdings, Inc. (CHUY - Free Report) carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 26.6% on average. Shares of CHUY have increased 61% in the past year.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS indicate an increase of 9.5% and 32.9%, respectively, from the year-ago period’s levels.