Restaurant Brands International is a heavyweight in the fast-food industry, commanding a fleet of popular chains including Burger King, Tim Hortons, Popeyes, and Firehouse Subs. The forthcoming unveiling of its fiscal fourth-quarter results on Tuesday, February 13, has investors eager for insights. Is this corporate giant poised for a post-2023 stock market knockout, or is it teetering on the brink of underperformance?
In the third quarter, the company saw a 4.2% net growth in its restaurants, with Popeyes experiencing the most substantial increase at 11.3%. The revenue forecast for QSR is intrinsically linked to the system sales it generates via its brands – a metric that can be bolstered by either escalating restaurant sales or a sudden surge in restaurant additions. Notably, Tim Hortons, Popeyes, and Firehouse Subs have significantly lower global market penetration compared to industry behemoths such as McDonald’s or Burger King, suggesting untapped potential for the establishment of new restaurants and a prolonged trajectory for revenue growth.
Volatility in Stock Performance
QSR’s stock has experienced a roller-coaster performance, with a 25% surge from early 2021 to the present – trailing behind the S&P 500, which soared by approximately 35% over the same period. However, the ascent of QSR’s stock has been far from smooth, with returns of -1% in 2021, a modest 7% in 2022, and a more impressive 21% in 2023. Comparatively, the S&P 500 yielded returns of 27% in 2021, a staggering decline of 19% in 2022, and a 24% rise in 2023, painting a picture of QSR’s underperformance. In an era where individual stocks, including heavyweights in the Consumer Discretionary sector and megacap stars, struggled to consistently outshine the S&P 500, QSR grapples with the vital question of whether it will replicate its past underperformance in the face of prevailing economic uncertainties.
As it stands, Restaurant Brands’ valuation stands at $75 per share, almost mirroring the existing market price, leaving investors to ponder the potential implication of this parity. To provide a more rigorous analysis, consult our interactive dashboard on “Restaurant Brands Earnings Preview: What To Expect in Fiscal Q4?” for comprehensive details.
The forthcoming reveal of Q4 results has heightened anticipation and speculation among investors. Trefis projects marginal shortfalls in QSR’s Q4 2023 revenues, estimating approximately $1.8 billion, while the consensus estimate presents a subtle variance. During Q3, QSR witnessed a 6% year-over-year growth in revenues, amounting to $1.8 billion, fueled by robust same-store sales growth across all segments. Comparable sales leaped by 7.0% during the quarter, with Burger King, Tim Hortons, and Popeyes chains demonstrating gains of 7.2%, 6.8%, and 7.0% respectively. Notably, the same-store sales metrics encompass only locations operational for a minimum of 13 months. As the company prepares to unveil its full-year 2023 performance, a robust 8% uptick in revenues is forecasted, reaching $7.1 billion.
Furthermore, analysts anticipate QSR’s Q4 2023 earnings per share (EPS) to marginally exceed consensus projections. In the previous quarter, the firm’s net income plummeted to $364 million from $530 million, resulting in a 6% year-over-year decline in EPS to $0.90. This decline was primarily attributed to income tax expense, unfavorable FX movements, and costs related to early debt extinguishment. Irrespective, adjusted EBITDA surged by 9% year-over-year to $698 million, with all four segments witnessing an upturn.
Stock Price and Comparative Performance
Assessing QSR’s valuation, Trefis has arrived at an EPS estimate of approximately $3.26, coupled with a P/E multiple of 23.1x in fiscal 2023, translating to a share price of $75 – aligning closely with the current market price. A cursory evaluation of QSR’s peers will provide investors with valuable insights into how Restaurant Brands’ stock fairs against industry counterparts in terms of critical metrics. Investors can explore peer comparisons across various sectors to make informed decisions.
| Returns | Feb 2024 MTD [1] |
Since start of 2023 [1] |
2017-24 Total [2] |
| QSR Return | -1% | 19% | 62% |
| S&P 500 Return | 3% | 30% | 123% |
| Trefis Reinforced Value Portfolio | 2% | 40% | 620% |
[1] Returns as of 2/9/2024
[2] Cumulative total returns since the end of 2016
As we eagerly await the unveiling of QSR’s Q4 results, investors are advised to exercise prudence and maintain a vigilant eye on any imminent fluctuations. The impending revelation of financial intricacies has roused a palpable excitement and apprehension among stakeholders, with hopes pinned on fathoming the vision for QSR’s future trajectory.
