Restaurant Brands: Massive Share Buyback Program Signals Strong Confidence In Future Growth

Restaurant Brands combines defensive positioning and aggressive expansion initiatives. The company’s strong international expansion plans, coupled with its substantial store modernization program and proven track record of operational improvements, position it well for sustained growth in the coming years.

Then the company’s commitment to shareholder returns through consistent dividend growth and stock buybacks add to its appeal. A strategic focus on operational efficiency should also lift future earnings as the stock trades at 16.8 times the company’s forward earnings forecast.

RESTAURANT BRANDS INTERNATIONAL INC. (Toronto symbol QSR; www.rbi.com) is the world’s third-largest fast-food operator and has 31,525 outlets in over 100 countries, comprised of Burger King, Tim Hortons (coffee and donuts), Popeyes Louisiana Kitchen (fried chicken) and Firehouse Subs locations.

The fast-food giant repurchased 7.6 million of its common shares between September 15, 2023, and September 14, 2024. It has now received stock exchange approval to buy back up to 32.0 million more shares (about 7% of the total outstanding) by September 15, 2025.

Stock buybacks reduce the total number of shares outstanding. That boosts earnings per share since profit is divided among fewer shares. The higher per-share earnings make the stock more attractive to investors and helps to increase share prices.

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The company now plans to open more than 500 Firehouse Subs restaurants across Brazil in the next 10 years. Firehouse Subs currently has over 1,300 outlets, mainly in the U.S., Canada and Puerto Rico, as well as Switzerland, Mexico, the UAE and Albania.

A Brazilian franchisee, who is the former CEO of the master franchisee of Burger King and Popeyes in Brazil, will operate these new outlets. Partnering with local entrepreneurs who can adjust the menu, advertising and décor to suit local tastes helps cut the risk of entering new foreign markets.

Growth Stocks: Restaurant Brands’ footprint expands and revenues rise with strategic group acquisition

In May 2024, the company acquired the remaining 85% of Carrols Restaurant Group (Nasdaq symbol TAST) that it didn’t already own for $974 million, which included $431 million of Carrols debt (all amounts except share price and market cap in U.S. dollars). Carrols owns 1,020 Burger King and 60 Popeyes restaurants in the U.S. Restaurant Brands will also invest $500 million to modernize 600 of those Burger King locations.

The purchase helped lift Restaurant Brands’ overall sales in the quarter ended September 30, 2024, by 24.7%, to $2.29 billion from $1.84 billion a year earlier. Same-store sales rose 2.3% at Tim Hortons, but fell 0.7% at Burger King, 4.0% at Popeyes, and 2.8% at Firehouse Subs. Earnings rose 3.3%, to $0.93 a share from $0.90.

The stock trades at a reasonable 16.8 times its forecast 2025 earnings of $3.72 U.S. a share. The shares yield 3.7%.

Recommendation in The Successful Investor: Restaurant Brands International Inc. is a buy.

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Jim Bates

Jim is an associate editor at TSI Network. He is the lead reporter and analyst for The Successful Investor and Wall Street Stock Forecaster and a member of the Investment Planning Committee. Jim has held the Chartered Financial Analyst designation since 1992 and spent more than a decade at the Financial Post DataGroup before joining TSI Network. He has a Bachelor of Commerce degree from the University of Toronto.

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