Restaurant Brands International (TSX:QSR), the parent company behind iconic brands such as Tim Hortons, Burger King, and Popeyes, is a company to watch closely as we head into 2025. Despite recent fluctuations in the stock price, with shares down about 13% from their 52-week high, the company remains a major player in the global fast-food industry. With a market cap just shy of $31 billion, QSR continues to leverage its diverse portfolio of brands to drive growth, even as challenges like inflation and changing consumer habits impact the sector.
Into earnings
In its most recent earnings report, QSR reported a slight dip in earnings with quarterly revenue growth of 26.2%. This shows strong momentum despite market headwinds. The company’s revenue reached $8.4 billion over the trailing 12 months, while net income was reported at $1 billion, a decline from the previous period. This drop in earnings was largely attributed to higher costs in the supply chain, plus softer-than-expected sales in some international markets. However, QSR’s operational efficiency and its strong brand recognition have allowed it to weather these challenges better than many of its competitors.
Despite this, QSR’s operating margin remains robust at 24.3%, showcasing its ability to generate significant profits from its operations. The restaurant franchisor’s quarterly earnings per share (EPS) stood at $4.59, thus reflecting a decrease from last year, but the company is still maintaining a healthy profit margin. The decrease in EPS is a concern for some investors. Yet it’s important to note that QSR is committed to long-term growth strategies that are focused on increasing market share and expanding into new geographic regions.
QSR’s strong balance sheet, with total cash of $1.3 billion, also positions it well for continued growth in 2025. The company’s ability to generate over $1.5 billion in operating cash flow gives it the flexibility to reinvest in its brands and pursue strategic acquisitions. That said, QSR’s relatively high debt load, with total liabilities of $15.9 billion, remains a concern. Sure, its current ratio of 0.96 is on the lower side. Yet it’s still manageable given the company’s profitability and cash flow.
Future outlook
One of the primary growth drivers for QSR is its international expansion strategy. Tim Hortons has seen a solid resurgence in the Canadian market. And now, Popeyes and Burger King have been ramping up their international presence. QSR’s focus on emerging markets such as India and Southeast Asia is proving fruitful as consumer demand for fast food in these regions continues to grow. The company’s digital and delivery platforms are also helping it tap into the changing dynamics of food consumption as more customers are opting for the convenience of delivery services.
In addition to its international push, QSR is also looking inward to innovate and update its menu offerings. Consumer preferences have shifted toward healthier and more sustainable options. So QSR has responded by expanding its plant-based menu items and incorporating more transparency into its sourcing practices. This commitment to sustainability, alongside technological advancements like self-order kiosks and mobile app ordering, is expected to enhance customer experience and drive future sales.
Looking ahead, QSR’s ability to adapt to consumer trends and expand its footprint in international markets will be key to its success in 2025. The company’s commitment to innovation and menu diversification should help mitigate some of the pressures facing the fast-food sector. However, challenges such as rising commodity prices and labour shortages could weigh on short-term earnings.
Foolish takeaway
Despite the challenges, QSR continues to offer an attractive dividend yield of around 3.8%, which will appeal to income-focused investors. The company has a payout ratio of 73%, ensuring that it is returning value to shareholders while still maintaining room for reinvestment. This healthy balance of dividends and reinvestment into growth initiatives makes QSR an appealing long-term investment for those looking for a mix of income and capital appreciation.
In terms of stock performance, QSR’s shares have been relatively stable, hovering just below $95 CAD. While the stock is down 13% from its 52-week high, it’s still trading well above its 52-week low of $86.06. Investors will need to monitor any updates regarding its growth initiatives and profitability as we move into 2025.
