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Restaurant Brands' (QSR) Up 49% in a Year: More Room to Run?

Restaurant Brands International Inc. QSR is likely to benefit from solid comps growth, digital innovation and expansion efforts. Also, the focus on menu innovation bodes well.

Shares of QSR have increased 48.5% in the past year compared with the Zacks Retail – Restaurants industry’s rise of 25.8%. Earnings estimates for 2023 have increased to $3.09 per share from $2.99 per share in the past 60 days. This depicts analysts' optimism over the company’s growth prospects. However, coronavirus-related woes and elevated inflationary pressures are a concern.

Zacks Investment Research
Zacks Investment Research


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Growth Drivers

Restaurant Brands, one of the world's largest quick service restaurant companies, impressed investors with solid comps growth. In first-quarter fiscal 2023, the company’s consolidated comparable sales came in at 10.3% compared with 7.4% reported in the prior-year quarter. Comps in Tim Hortons, Burger King, Popeyes came in at 13.8%, 10.8% and 5.6% compared with 8.4%, 9.9% and (3%) reported in the prior-year quarter. The upside was primarily driven by higher traffic, strengthening of core offerings, enhanced restaurant operations and pricing initiatives.

The company is focused on expanding the delivery via digital platform amid the pandemic. During first-quarter 2023, digital sales increased 30% year over year, courtesy of strong contributions from kiosks and delivery. The company reported solid digital sales in markets such as France and Spain, primarily driven by attributes such as growth in delivery, an increase in mobile order and pay and the continued traction in the loyalty program. The company is optimistic about growth of digital sales in international markets, backed by various service modes.

Restaurant Brands believes that there is a huge opportunity to grow all its brands around the world by expanding its presence in existing markets and entering new markets. Currently, it has approximately 30,000 restaurants worldwide. The company is very optimistic about growth opportunities in 2023 and is on track to grow its restaurant base toward its long-term goal of 40,000 locations.

QSR believes that new product development is a key driver of long-term success for its brands and will continue to be in focus. The company has an unwavering focus on its goal to drive traffic and revenues at its restaurants through core product platforms, focus on a balanced menu design, the expansion of delivery business, promotional offerings, efforts to grow breakfast daypart and product launches.

Concerns

The rise in labor and commodity costs continues to hurt the company. The industry players expect to witness higher costs due to labor and supply chain shortages for quite some time. The company has been witnessing labor challenges in a handful of markets.

Zacks Rank & Other Key Picks

Restaurant Brands International currently sports a Zacks Rank #3 (Hold).

Some top-ranked stocks from the Zacks Retail and Wholesale sector are:
 
MercadoLibre, Inc. MELI carries a Zacks Rank #1 (Strong Buy). MELI has a trailing four-quarter earnings surprise of 35%, on average. Shares of MELI have gained 74.9% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MELI’s 2023 sales and EPS indicates a rise of 27.6% and 75%, respectively, from the year-ago period’s levels.

Abercrombie & Fitch Co. ANF carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 480.6%, on average. Shares of ANF have increased 83.3% in the past year.

The Zacks Consensus Estimate for ANF’s 2023 sales and EPS indicates a rise of 3.4% and 660%, respectively, from the year-ago period’s levels.

Chipotle Mexican Grill, Inc. CMG carries a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 4.7%, on average. Shares of CMG have increased 53.6% in the past year.

The Zacks Consensus Estimate for CMG’s 2023 sales and EPS indicates a rise of 14% and 34%, respectively, from the year-ago period’s levels.

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