Restaurant Brands International Inc.
QSR
will likely benefit from expansion efforts, loyalty programs and menu innovation. However, supply chain disruptions and a decline in traffic from pre-pandemic levels are a concern.
Let us discuss the factors highlighting why investors should retain the stock for the time being.
Factors Driving Growth
Restaurant Brands believes there is a huge opportunity to grow all its brands worldwide by expanding its presence in existing markets and entering new markets. The company is confident about the Tim Hortons brand’s long-term growth prospects and remains committed to delivering on its international growth strategy of expanding the brand worldwide. Additionally, the prospects of the company’s business in Canada appear bright. Evidently, the company has formed master franchise joint venture partnerships (MFJVs) for the brand in Mexico and Spain. Moreover, the company is optimistic about the major expansion opportunity that lies ahead for the brand in India. The company continues to focus on Popeyes’ development pipeline to drive growth. The brand covers international markets, including Spain, the Philippines, Turkey, Mexico and Brazil. In 2022, the company intends to expand the brand’s presence in new markets (including Romania and France) and anticipates opening over 200 new locations in North America.
The company’s loyalty program is gaining popularity. Restaurant Brands stated that following a rapid ramp-up phase, nearly half of the customers pay through Tim’s Rewards. During first-quarter 2022, the company reported continued traction from the respective brands loyalty programs. With significant progress in terms of user experience and gaining more active users, the company is optimistic about its potential for the respective brands over the long term. The company intends to integrate loyalty programs into digital boards to derive synergies.
Restaurant Brands has an unwavering focus on its goal to drive traffic and revenues at its restaurants through core product platforms, a continual focus on a balanced menu design, expansion of delivery business, promotional offerings, efforts to grow breakfast daypart and product launches.
During first-quarter 2022, the company made solid progress with regard to its core products with ingredients. In the Burger King segment, the company demonstrated a balanced approach to menu innovation through modernizing the HOME OF THE WHOPPER. To this end, the company unveiled a new $5 Have It Your Way Meal featuring a Double WHOPPER Jr. Also, it added three flavors and included the product to its flame-grilled selection for a limited time. Positive customer feedback was witnessed on the back of a healthy price point coupled with strong messaging and high-quality ads (particularly on its digital platforms). Coming to the Popeyes segment, the company benefitted from the expansion of the chicken sandwich platform with the launch of Buffalo Ranch Chicken Sandwich. Also, it witnessed a positive contribution from the launch of its $6 Big Box. The company intends to focus on streamlining its menu to create efficiencies, improve the guest experience and drive profitable sales.
Concerns
Image Source: Zacks Investment Research
Shares of Restaurant Brands have declined 19.5% in the past year compared with the
industry
’s 18.1% fall. The downside was caused by the coronavirus crisis. Pandemic-induced restrictions, labor challenges and supply chain disruptions have taken an enormous toll on the company. Although most dining services are open, traffic is still low compared with pre-pandemic levels. The company intends to monitor the situation regularly to gauge the impacts of COVID-19.
Zacks Rank & Key Picks
Restaurant Brands currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks
Retail-Wholesale
sector are
Dollar Tree Inc.
DLTR
,
BBQ Holdings, Inc.
BBQ
and
Arcos Dorados Holdings Inc.
ARCO
.
Dollar Tree sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 13.1%, on average. Shares of the company have gained 69.7% in the past year.
The Zacks Consensus Estimate for Dollar Tree’s 2022 sales and earnings per share (EPS) suggests growth of 6.7% and 40.5%, respectively, from the year-ago period’s levels.
BBQ Holdings carries a Zacks Rank #2 (Buy). BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have decreased 34.7% in the past year.
The Zacks Consensus Estimate for BBQ Holdings’ 2022 sales and EPS suggests growth of 46.1% and 67.6%, respectively, from the year-ago period’s levels.
Arcos Dorados carries a Zacks Rank #2. Arcos Dorados has a long-term earnings growth of 34.4%. Shares of the company have risen 12.8% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 16.6% and 83.3%, respectively, from the year-ago period’s levels.
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