Restaurant Brands International Inc. QSR is likely to benefit from strong Tim Hortons performance, menu innovation and marketing strategies. Also, the focus on the Reclaim the Flame initiative bodes well. However, macro pressures and general softening in the consumer environment are a concern.

Factors Driving Growth of QSR Stock

Restaurant Brands continues to benefit from strong Tim Hortons performance. During the third quarter, comparable sales in the segment increased 2.7% year over year, driven by traffic growth. The brand maintained its leadership in coffee, baked goods and breakfast, bolstered by innovative promotions like a $3 hot breakfast sandwich with coffee, boosting traffic and profits.

New PM menu offerings, including loaded Anytime Snackers and flatbread pizzas, drove a 5.2% increase in PM food sales year over year. Also, operational enhancements, including improved drive-through speeds and effective marketing campaigns, supported traffic growth and market outperformance.

Strong International segment performance bodes well for the company. During the third quarter, the International segment posted solid results, with a 1.8% increase in comparable sales and 8.0% growth in system-wide sales. The upside was backed by strong Burger King’s performance, achieving growth in markets such as Australia, Spain, Korea, the U.K. and Japan.

During the quarter, Popeyes reported solid performance, particularly in the U.K., where the brand has grown to over 55 locations (in three years) and generating $130 million in system-wide sales. Expansion opportunities remain significant in both Burger King and Popeyes markets globally.

QSR focuses on strategic investments to drive growth. During the third quarter of 2024, QSR maintained momentum on key strategic programs, particularly the "Reclaim the Flame" plan at Burger King U.S., aimed at revitalizing the brand. Investments in marketing and restaurant modernization are delivering progress, with franchisees set to increase their ad fund contributions from 4% to 4.5% beginning in 2025. This shift will likely provide a tailwind for QSR’s AOI and adjusted earnings per share (EPS) growth.

Concerns for QSR Stock

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In the past six months, Restaurant Brands’ shares have gained 3.8% compared with the industry’s 9.8% rise. The dismal performance can be attributed to a softer consumer backdrop in China and the repercussions of the conflict in the Middle East.

The company has been continuously shouldering increased expenses, which have been detrimental to margins. In the third quarter of 2024, total operating costs and expenses came in at $1.7 billion compared with $1.3 billion reported in the prior-year quarter. During the quarter, company restaurant expenses increased to $473 million from $58 million reported in the year-ago quarter. The upside was primarily driven by increases in company restaurant expenses due to restaurant acquisitions from franchisees. Going forward, the company is cautious of foreign exchange volatility, rising interest rates and general softening in the consumer environment.