Restaurant Brands International Inc. (TSX: QSR)(NYSE: QSR) just delivered an incredible Q4 2016 earnings report and fiscal 2016 year-end results. The stock is now up about 9% since I recommended it just under a month ago when it was near all-time highs.
Sure, the stock isn’t cheap, but you’re paying for a top-tier management team in 3G Capital. They’ve got the experience and expertise to deliver impressive earnings beats on a consistent basis over the long term. It’s truly a stock that you can buy now and forget about for many decades. Although the stock is at a new all-time high at about $70, I don’t think it’s too late to get a piece of this growth story. The management team knows how to expand, and it knows how to drive same-store sales while doing so.
Terrific Q4 2016 and fiscal 2016 results
Restaurant Brands International soared 4.48% on Monday as the company released its earnings for the quarter and the full year. The company reported a Q4 EPS of $0.44, which beat analyst expectations by $0.02. Revenue of $1.11 billion was reported, which was a 4.7% increase year over year and beat analyst expectations by $10 million.
For the full-year results, the company reported an adjusted diluted EPS of $1.58, which is up a whopping 45% compared to last year’s results. System-wide sales increased 5.2% at Tim Hortons and 7.8% at Burger King on a constant currency basis.
The restaurant count increased 4.5% at Tim Hortons and 4.9% at Burger King year over year. The company is growing fast, and it’s doing so very profitably. I believe Monday’s rally in the stock was warranted and the stock could be on a sustained rally to even higher levels.
Hungry for another takeover?
The management team looks to be hungry for another takeover. It’s reported that the company approached Popeyes Louisiana Kitchen Inc. (NASDAQ:PLKI) about a potential acquisition. The terms and deal price haven’t been agreed upon, but the news of the potential acquisition sent Popeyes shares soaring.
Chicken is a huge market that accounts for 10% of the fast-food industry according to IBISWorld. The Popeyes deal would make a lot of sense for Restaurant Brands. There’s a ton of room for expansion, and there’s no question that there’s no better team for the job than 3G Capital. They have the formula for international expansion and same-store sales growth, and any acquisitions are very likely to be huge successes over the long run.
Restaurant Brands could be the Berkshire Hathaway Inc. (NYSE: BRK.B)(NYSE: BRK.A) of the fast-food business. There could be many other potential acquisitions down the road, and you can count on the top-notch management team to drive long-term EPS via expansion and same-store sales growth initiatives.
Takeaway
Sure, the company seems expensive at $70, but you’re paying for one of the best management teams in the world. Warren Buffett once said, “…it’s better to buy a wonderful business at a fair price than a fair business at a wonderful price.” Restaurant Brands is a wonderful business that will make investors very rich over the long term.
The stock isn’t a steal by any means, but I still think there’s a lot of long-term upside to be had from current levels. Another 25% rally in 2017 is definitely possible, especially considering the fact that 3G Capital continues to fire on all cylinders.
