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Here's Why You Should Retain Restaurant Brands (QSR) Stock
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Restaurant Brands International Inc. (QSR - Free Report) is likely to benefit from strong comps growth, Tim Hortons performance and digitalization efforts. Also, the focus on unit expansion bodes well. However, high costs and general softening in the consumer environment are a concern.
Let us discuss the factors highlighting why investors should retain the stock.
Factors Driving Growth
Restaurant Brands continues to impress investors with solid comps growth. In fourth-quarter 2023, the company’s consolidated comparable sales came in at 9.6% compared with 11.4% reported in the prior-year quarter. Comps in Tim Hortons (or TH), Burger King (BK) and Popeyes (PLK) came in at 8.4%, 6.3% and 5.5% compared with 10.1%, 5.5% and 1.7%, respectively, reported in the prior-year quarter. The upside was primarily driven by the strengthening of core offerings and enhanced restaurant operations.
During the fourth quarter, Tim Hortons' PM-led snacking initiatives, including savory twists, dream cookies, loaded bowls and wraps, played a pivotal role in achieving a 7% year-over-year increase in evening food sales. The initiatives also played a key role in advancing growth of the PM food market share to nearly 9%, up from approximately 8% in 2022. In the fourth quarter, revenues from Tim Hortons totaled $1.02 billion, up 3.2% from the prior-year quarter’s levels. The company intends to focus on improving the quality of its offerings and expand into high-growth food and beverage categories (with reduced penetrated day parts) to drive growth.
Increased focus on digitalization efforts bodes well. During fourth-quarter 2023, digital sales increased over 40% year over year, courtesy of strong contributions from kiosks and delivery. The company showcased strong digitalization efforts and continued to drive growth for its Tim Hortons brand, with 5 million average monthly users and a consistent digital sales mix of approximately 30% in the quarter. The company is optimistic about growth of digital sales in international markets, backed by various service modes.
QSR sees immense potential to expand its brands globally by strengthening its presence in existing markets and venturing into new ones. In 2023, expansion efforts extended to more than 75 markets beyond the United States and Canada, with the securing of 15 development and master franchise agreements for new markets. This includes introducing Tim Hortons in Singapore and South Korea, Firehouse in Mexico and the UAE, and Popeyes and Burger King in Bosnia.
Together, the brands contributed over 45% of net restaurant growth in 2023, a considerable rise from the 10% reported in 2019. Primary drivers of net restaurant growth in 2023 included Burger King in China and India, as well as in France and Spain. Collaborations at Tim Hortons and Popeyes played a pivotal role in bolstering brand recognition in new markets and accelerating development. The company is optimistic about growth prospects and is committed to expanding its restaurant base towards its long-term goal of 40,000 locations.
Image Source: Zacks Investment Research
In the past six months, Restaurant Brands’ shares have gained 23.3% compared with the industry’s growth of 17%.
Concerns
The company has been bearing the brunt of high expenses for some time. In fourth-quarter 2023, total costs of sales came in at $643 million, up 3.9% from $619 million reported in the prior-year quarter. The upside was primarily driven by increases in supply chain sales and consumer packaged goods sales, as well as increases in commodity prices.
The company remains cautious about foreign exchange volatility, rising interest rates and general softening in the consumer environment (which have been exacerbated by conflicts in the Middle East). For 2024, the company expects net interest expense (excluding the acquisition of Carrols) in the range of $555-$565 million.
Zacks Rank & Key Picks
Restaurant Brands currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) indicates 4.9% and 30.7% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. (TXRH - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 42.2% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14% and 25.1%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. SHAK’s shares have surged 91.7% in the past year.
The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.
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Here's Why You Should Retain Restaurant Brands (QSR) Stock
Restaurant Brands International Inc. (QSR - Free Report) is likely to benefit from strong comps growth, Tim Hortons performance and digitalization efforts. Also, the focus on unit expansion bodes well. However, high costs and general softening in the consumer environment are a concern.
Let us discuss the factors highlighting why investors should retain the stock.
Factors Driving Growth
Restaurant Brands continues to impress investors with solid comps growth. In fourth-quarter 2023, the company’s consolidated comparable sales came in at 9.6% compared with 11.4% reported in the prior-year quarter. Comps in Tim Hortons (or TH), Burger King (BK) and Popeyes (PLK) came in at 8.4%, 6.3% and 5.5% compared with 10.1%, 5.5% and 1.7%, respectively, reported in the prior-year quarter. The upside was primarily driven by the strengthening of core offerings and enhanced restaurant operations.
During the fourth quarter, Tim Hortons' PM-led snacking initiatives, including savory twists, dream cookies, loaded bowls and wraps, played a pivotal role in achieving a 7% year-over-year increase in evening food sales. The initiatives also played a key role in advancing growth of the PM food market share to nearly 9%, up from approximately 8% in 2022. In the fourth quarter, revenues from Tim Hortons totaled $1.02 billion, up 3.2% from the prior-year quarter’s levels. The company intends to focus on improving the quality of its offerings and expand into high-growth food and beverage categories (with reduced penetrated day parts) to drive growth.
Increased focus on digitalization efforts bodes well. During fourth-quarter 2023, digital sales increased over 40% year over year, courtesy of strong contributions from kiosks and delivery. The company showcased strong digitalization efforts and continued to drive growth for its Tim Hortons brand, with 5 million average monthly users and a consistent digital sales mix of approximately 30% in the quarter. The company is optimistic about growth of digital sales in international markets, backed by various service modes.
QSR sees immense potential to expand its brands globally by strengthening its presence in existing markets and venturing into new ones. In 2023, expansion efforts extended to more than 75 markets beyond the United States and Canada, with the securing of 15 development and master franchise agreements for new markets. This includes introducing Tim Hortons in Singapore and South Korea, Firehouse in Mexico and the UAE, and Popeyes and Burger King in Bosnia.
Together, the brands contributed over 45% of net restaurant growth in 2023, a considerable rise from the 10% reported in 2019. Primary drivers of net restaurant growth in 2023 included Burger King in China and India, as well as in France and Spain. Collaborations at Tim Hortons and Popeyes played a pivotal role in bolstering brand recognition in new markets and accelerating development. The company is optimistic about growth prospects and is committed to expanding its restaurant base towards its long-term goal of 40,000 locations.
Image Source: Zacks Investment Research
In the past six months, Restaurant Brands’ shares have gained 23.3% compared with the industry’s growth of 17%.
Concerns
The company has been bearing the brunt of high expenses for some time. In fourth-quarter 2023, total costs of sales came in at $643 million, up 3.9% from $619 million reported in the prior-year quarter. The upside was primarily driven by increases in supply chain sales and consumer packaged goods sales, as well as increases in commodity prices.
The company remains cautious about foreign exchange volatility, rising interest rates and general softening in the consumer environment (which have been exacerbated by conflicts in the Middle East). For 2024, the company expects net interest expense (excluding the acquisition of Carrols) in the range of $555-$565 million.
Zacks Rank & Key Picks
Restaurant Brands currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Retail-Wholesale sector include:
Brinker International, Inc. (EAT - Free Report) carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 212.7% on average. Shares of EAT have surged 35.7% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) indicates 4.9% and 30.7% growth, respectively, from the year-ago period’s levels.
Texas Roadhouse, Inc. (TXRH - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter negative earnings surprise of 3.9%, on average. The stock has gained 42.2% in the past year.
The Zacks Consensus Estimate for TXRH’s 2024 sales and EPS suggests rises of 14% and 25.1%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 92.6%, on average. SHAK’s shares have surged 91.7% in the past year.
The Zacks Consensus Estimate for SHAK’s 2024 sales and EPS indicates 14.6% and 91.9% growth, respectively, from the year-ago period’s levels.