Restaurant Brands’ shares have jumped 22% in the past year, and are now just below their all-time high. That big gain is largely due to the company’s success at fueling post-pandemic growth with more drive-thru outlets and improved mobile ordering apps. The company is also opening more outlets overseas, which will let it profit as countries like India and China drop all COVID-19 restrictions.
Sales bump up an impressive 8.3% in the last quarter as it continues to build on its mobile app strengths. The potential for more gains makes this one of our top picks.
Meanwhile, the stock trades at 20.6 times the company’s 2023 earnings forecast.
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RESTAURANT BRANDS INTERNATIONAL INC. (Symbol QSR on New York; www.rbi.com) gives you exposure to the world’s third-largest fast-food operator. That’s after McDonald’s (No. 1) and Yum Brands (No. 2). The company has 30,125 outlets in over 100 countries: 18,935 Burger King, 5,662 Tim Hortons (coffee and donuts), 4,269 Popeyes Louisiana Kitchen (fried chicken) and 1,259 Firehouse Subs.
The company has entered into a master franchise agreement with BKR Co. Ltd. Under the deal, BKR will open and run Tim Hortons outlets in South Korea starting later this year.
BKR is the company that operates Burger King in South Korea.
Meanwhile, Tim Hortons is launching a credit card that can be used through its mobile app.
Tims Financial is a new division of Tim Hortons that will offer a no-annual-fee Mastercard powered by Neo Financial. The card will be launched in the coming months, but interested customers can sign up for a waitlist on the Tims Financial website.
The Tims Rewards app already has features like mobile order and scan and pay, making a new payment option the logical next step.
Tim Hortons will also offer a second version of its credit card aimed at students, newcomers and others with limited or no credit history. This secured credit card will earn Tims Rewards Points and may help users build their credit.
Almost five million Canadians are using the Tims app every month already.
Growth Stocks: Restaurant Brands’ sales and earnings rose sharply as store expansions continue
The company continues to benefit from a multi-year plan to spur its growth with more drive-thru locations, expanding its mobile and online ordering operations and new menu items.
Restaurant Brands’ overall sales in the quarter ended June 30, 2023, rose 8.3%, to $1.76 billion from $1.64 billion a year earlier (all amounts except share price and market cap in U.S. dollars). That gain was largely because the company raised its selling prices in response to higher costs for food ingredients, fuel and labour.
Overall same-store sales in the quarter rose 9.6% reflecting gains at Tim Hortons (up 11.4%), Burger King (up 10.2%), Popeyes (up 6.3%) and Firehouse Subs (up 2.1%).
The company earned $0.85 a share before unusual items in the quarter, up 3.7% from $0.82 a year earlier.
Restaurant Brands also continues to expand overseas, particularly India and China. In the latest quarter, countries outside of Canada and the U.S. accounted for 13% of its total revenue.
The company cuts the risk of entering unfamiliar markets by teaming up with franchisees who operate the stores and can adapt menus for local tastes and customs.
For example, due to India’s religious customs, its Burger King outlets in that country swap beef patties for other meats such as chicken or vegetarian options.
Restaurant Brands’ strong balance sheet will let it keep expanding. As of June 30, 2023, it held cash of $1.21 billion, and its long-term debt of $12.80 billion is a manageable 42% of its market cap.
The company will probably earn $3.24 a share for all of 2023, and the stock trades at a reasonable 20.6 times that estimate. It also raised your quarterly dividend by 1.9% with the April 2023 payment. The new annual rate of $2.20 a share yields a solid 3.3%.
Recommendation in Power Growth Investor: Restaurant Brands Int’l Inc. is a buy.