Restaurant Brands International Inc. stock (NYSE: QSR) is one of the largest fast-food restaurant chains in the world and it is a combination of Burger King, Tim Hortons, Popeyes, and, since late 2021, Firehouse Subs. The company is scheduled to report its fiscal third-quarter results on Friday, November 3. We expect QSR’s stock to likely trade higher due to both revenues and earnings beating expectations marginally in its third-quarter results. In Q2, the company’s net restaurant growth was 4.1% during the quarter, with the Popeyes brand seeing the biggest increase in units on a percentage basis. The revenue stream of QSR is directly influenced by the system sales it generates across its brands, which can be increased by growing restaurant sales or adding as many restaurants as possible. Also, Tim Hortons, Popeyes, and Firehouse Subs are far less penetrated across international markets than McDonald’s or Burger King. That means more room to open new restaurants and a longer runway for revenue growth.
QSR stock has seen little change, moving slightly from levels of $60 in early January 2021 to around current levels, vs. a similar change for the S&P 500 over this roughly 3-year period. Overall, the performance of QSR stock with respect to the index has been quite volatile. Returns for the stock were -1% in 2021, 7% in 2022, and 4% in 2023 (YTD). In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 9% in 2023 (YTD) – indicating that QSR underperformed the S&P in 2021 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Staples sector including WMT, PG, and COST, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could QSR face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?
Our forecast indicates that Restaurant Brands’ valuation is $75 per share, which is nearly 12% higher than the current market price. Look at our interactive dashboard analysis on Restaurant Brands Earnings Preview: What To Expect in Fiscal Q3? for more details.
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(1) Revenues expected to be slightly above consensus estimates
Trefis estimates QSR’s Q3 2023 revenues to be around $1.9 Bil, marginally above the consensus estimate. QSR’s Q2 revenues grew 9% year-over-year (y-o-y) to $1.8 billion, fueled by strong same-store sales growth from all its segments. The company’s consolidated comparable sales were up nearly 10% in Q2, led by 11% growth at Tim Hortons Canada, 10% growth in Burger King, a 6% rise at Popeyes, and 2% growth in Firehouse Subs. It should be noted that only locations that have been open for at least 13 months are included in its same-store sales metrics. For the full-year 2023, we expect the QSR’s Revenues to grow 8% to $7.1 billion.
2) EPS is also likely to marginally beat consensus estimates
QSR’s Q3 2023 earnings per share (EPS) is expected to come in at 88 cents per Trefis analysis, slightly above the consensus estimate. In Q2, the company’s net income rose to $351 million from $346 million a year ago, which led to EPS growing 4% y-o-y to $0.85. In addition, its adjusted EBITDA was up 10.3% y-o-y to $665 million – with all four segments seeing an increase.
(3) Stock price estimate higher than the current market price
Going by our QSR’s Valuation, with an EPS estimate of around $3.26 and a P/E multiple of 23.1x in fiscal 2023, this translates into a price of $75, which is 12% higher than the current market price.
It is helpful to see how its peers stack up. QSR Peers shows how Restaurant Brands’ stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
|S&P 500 Return||0%||9%||87%|
|Trefis Reinforced Value Portfolio||0%||18%||504%|
 Month-to-date and year-to-date as of 11/1/2023
 Cumulative total returns since the end of 2016