Restaurant Brands International (TSX:QSR)(NYSE:QSR) is a top Canadian stock behind three legendary fast-food chains in Tim Hortons, Burger King, and Popeyes Louisiana Kitchen. As you’d imagine, the company has been in a world of pain during this pandemic. Dining room closures and a sub-par delivery platform have put the firm at a huge disadvantage to many of its peers in the fast-food scene who’ve been able to get by on takeout and mobile ordering.
Tim Hortons has been under the most pressure over this past year, with comps nosediving uncontrollably. The challenges at the iconic Canadian coffee and bake shop started well before the insidious coronavirus struck last year. Still, the pandemic certainly has been salt in the wounds of an already challenged company that struggled to live up to the expectations of Canadian consumers and investors.
Undoubtedly, many would be quick to conclude that the brand has been a complete flop, especially relative to the profound success that is Popeyes Louisiana Kitchen. That said, I still think it’s way too early to conclude that the iconic Canadian coffee chain can’t turn the ship around once this horrific pandemic is over.
If Restaurant Brands can turn Popeyes around, it can do the same with Tim Hortons
Criticize Restaurant Brands’s management if you will, but they’re the same folks behind the industry-moving success that was Popeyes’s legendary chicken sandwich.
They made Popeyes the best that it can be. As the chicken chain looks to expand its reach globally, you can expect Popeyes will gain more influence and continue leading the upward charge for the Canadian stock. Right now, Popeyes doesn’t make up a huge chunk of QSR pie. But it’s growing fast, and it would be a mistake to discount the chain’s international growth potential over the next decade. The chicken wars are just getting started, after all!
If Restaurant Brands can bring out the best in Popeyes, I’m sure they can do the same with Tim Hortons. It’ll just require a bit more time and the end of this pandemic, given a big chunk of Tim Hortons’s sales are derived from the daily routine that’s been drastically altered amid COVID-19 lockdowns.
The recent stay-at-home order for Ontario is going to hit Tim Hortons very hard. But looking beyond this third wave, we’ll have more vaccine jabs administered and could be poised a move towards normalcy. A more favourable environment in the second half could allow Tim Hortons to make up for lost time in the latter two quarters of 2021. If all goes well, the third and fourth quarters could see some incredibly strong year-over-year numbers.
Restaurant Brands: The most underrated Canadian stock?
Tim Hortons was a major sore spot for Restaurant Brands once again, with comps nosediving 14% for the quarter. The damage was offset by strength in Popeye’s and flat comps at Burger King, both of which were as much as you could ask for given the dire circumstances. With a tonne of turnaround potential and a bountiful dividend yielding north of 3%, Restaurant Brands is one of the least-appreciated reopening plays on the TSX. If you’re able to look beyond 2021, the Canadian stock, I believe, is way too cheap to ignore at just $82 and change.
