Restaurant Brands (TSX: QSR) is among the most prominent fast-food giants in the world. The Canada-based company is the parent of every Canadian’s favourite chain, Tim Hortons, as well as Burger King, Popeyes, Firehouse Subs, and a portfolio of other companies, which is likely to continue to grow over time.
As many investors can see from the stock chart above, Restaurant Brands stock really hasn’t done much over the past two years and continues to trade in a relatively rangebound way. However, there is reason to be bullish on this top-tier quick-service restaurant giant.
Here’s why I think now may be a great time to add exposure to Restaurant Brand stock.
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Resilience showing up in quarterly earnings
Restaurant Brands’s recent third-quarter earnings report provided investors looking for some sort of resilience with exactly what they may have been after. The company has faced immense pressure from both traditional rivals and emerging players, who continue offering aggressive promotions. And internationally, the company has been dealing with disputes with its Burger King China master franchisee.
However, Restaurant Brands’s management team hasn’t been sitting on its hands. In combating slowing same-store sales growth (which has come under analyst expectations in recent quarters), the company has seen improving performance from its core Tim Hortons business, which drove 2.3% global same-store sales growth on a year-over-year basis.
This led the company to bring in $577 million in net earnings this past quarter, which was down slightly from the $582 million seen in the same quarter a year prior. However, with 3.8% net restaurant growth in the third quarter (Q3), expectations are that growth should resume in the fourth quarter, barring any major global macro shocks.
Other positive growth factors
In addition to strong organic growth, Restaurant Brands has continued to amp up its strategic growth initiatives. In 2024, the company made a number of acquisitions that expanded its revenue and net income while diversifying its business into higher-growth markets around the world.
The company completed its acquisition of Popeyes China and the Carrols Restaurant Group (the world’s largest Burger King franchisee), as well as adding a new segment called “Restaurant Holdings” under the company’s umbrella. A number of other non-Carrols Burger King franchises were added to its holdings, amounting to 165 such restaurants this past quarter, up from 50 one year ago.
In looking to “Reclaim the Fame,” by adding more U.S. Burger King franchisees, the company will invest $400 million in revitalizing this brand. If these investments pay off as many expect, the company could be poised for significant growth over time.
Future outlook
There are a number of factors which appear to be weighing on Restaurant Brands stock right now. From waning expectations for the fast-food industry as a whole (largely due to the rise of GLP-1 drugs) to a portfolio of banners which some consider to be washed up, the company will continue to have to invest in itself in order for investors to be comfortable paying the current market multiple for this stock.
However, with Restaurant Brands stock now trading at just 16 times earnings with a 3.5% dividend yield, this is a stock I think provides excellent value and growth potential, as well as meaningful income, for investors of all types. Thus, this is a stock I think is worth buying and potentially backing up the truck on if its stock price continues to decline from here.
