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Growth Opportunity: Restaurant Brands International Inc.

Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) is a stock that investors have watched improve with each passing quarter and become a great candidate for nearly any portfolio. For those unaware of the company, Restaurant Brands International is the name behind the Tim Hortons, Burger King, and, more recently, Popeye’s brands.

A global force for expansion

There’s plenty to love about Restaurant Brands International. One of the first things that strikes me about the company is the impressive portfolio, and how management has been able to leverage one successful part of one brand and apply it to another.

By way of example, there are few brands that are as internationally renowned or as successful at expanding into new markets as Burger King. Burger King’s foray into over 100 countries has become a blueprint for other franchises, and Restaurant Brands International has taken that successful model and applied it to the Tim Hortons’ brand.

Tim Hortons is set to expand into the U.K. with a Glasgow location to be followed by several other locations within the next few months. In the Philippines, Tim Hortons set up shop earlier this year, drawing crowds to its Manilla location.

Another market that Tim Hortons is targeting is Mexico.

With each new market, the strategy is the same. Restaurant Brands International establishes a master franchise joint-venture agreement in the new market with a circle of investors. Those investors, in turn, become the master franchisee for the new target market and then work to get locations opened in that new market.

The recent acquisition of Popeye’s is likely to see the company adopt a similar growth-minded approach to that brand, which lacks a significant international presence at the moment.

Efficiency is key

Running a business the size of Restaurant Brands International that incorporates multiple global brands requires an immense amount of coordination and efficiency. In fact, after the creation of the company, critics pointed to the different, overlapping, and complex businesses of both Tim Hortons and Burger King, and cited that it would take several years of cost-cutting and efficiency improvements to turn a profit.

Those critics didn’t count on 3G Capital — managers of Restaurant Brands International. 3G is known for being one of the most efficient operators in the business with a simple strategy: reduce waste, cut costs, and simplify business processes while seeking out aggressive growth.

That formula seems to work well, as Restaurant Brands International continues to deliver strong results with each passing quarter.

Strong quarterly results

In the most recent quarter, Restaurant Brands International saw revenue surge to US$1,000.6 million, handily beating the US$918.5 million reported in the same quarter last year. Net income attributable to common shareholders came in at US$50.2 million for the quarter, slightly higher than the US$50 million reported in the same quarter last year.  In terms of earnings, Restaurant Brands International saw adjusted diluted earnings per share increase by 20% over the same quarter last year, coming in at US$036 per share.

System-wide sales growth came in at 3.3% for Tim Hortons and 6.2% for Burger King. The growth in sales occurred despite relatively flat comparable sales growth that declined by 0.1%.

Restaurant Brands International offers investors a quarterly dividend of $0.26 per share. At the current stock price, this results in a yield of 1.26%. While this yield is unlikely to be reason enough to invest in Restaurant Brands International, the company has steadily increased the dividend over the past few quarters, and that trend is unlikely to change anytime soon.

Restaurant Brands International remains a great investment. Some critics point to the fact that the stock may seem a little expensive at current levels, but, in my opinion, there is more growth in store for the company, and investors who choose to remain on the sidelines may miss out.

36-Year Old CEO Bets Over $300 Million on 1 Stock

Iain Butler, Lead Adviser of Stock Advisor Canada, recommended this little tech darling to thousands of loyal members last March... and those that followed his advice are up 127.7% (they’ve already made 2X their money!).

Not to mention this tiny Eastern Ontario company has already been recommended by both Motley Fool co-founders, David and Tom Gardner, because of its amazing similarity to an “early stage” Amazon.

Find out why Tom Gardner was recently on BNN’s Money Talk raving about this company, and how you can read all about it inside Stock Advisor Canada. Click here to unlock all the details about his Canadian rule breaker!


Fool contributor Demetris Afxentiou has no position in any stocks mentioned. The Motley Fool owns shares of RESTAURANT BRANDS INTERNATIONAL INC.

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