Restaurant Brands (QSR) Hits 52-Week High: What's Driving It?
Restaurant Brands International Inc. QSR reached a new 52-week high of $79.45 on Jan 10. The stock pulled back to end the trading session at $78.63, up 0.9% from the previous day’s closing price of $77.91.
The current Zacks Rank #2 (Buy) company’s shares gained 25.1% in the past three months, outperforming the Zacks Retail - Restaurants industry’s 14.3% growth, the Zacks Retail-Wholesale sector’s 14.8% increase and the S&P 500 Index’s 9.5% rise.
The company is benefiting from its expansion initiatives, menu innovation and focus on digitalization. These tailwinds are aiding the company in increasing its guest traffic, thus leading to a rise in its comparable sales, primarily in Tim Hortons, Burger King and Popeyes, the company’s top three brands.
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The company’s earnings estimate for 2024 has moved north to $3.37 per share from $3.36 per share in the past seven days. The stock portrays a positive trend, indicating robust fundamentals and continuation of outperformance in the near term, despite an uncertain economic scenario.
Attractive Factors of the Stock
Expansion Initiatives: Restaurant Brands is intent on expanding its footprint in new and existing markets. Also, the company continues to evaluate opportunities to speed up the international development of all three brands (Tim Hortons, Burger King and Popeyes) by establishing master franchisees with exclusive development rights and joint ventures with new and existing franchisees.
During the third quarter of 2023, QSR opened 250 net new restaurants, contributing to 4.2% year-over-year growth in the overall restaurant count. Furthermore, in the quarter, the company introduced a development incentive program for U.S. franchisees, providing growth opportunities in key markets. Internationally, the company has signed agreements to open more than 100 restaurants in the UAE and Oman over the next 10 years. The company is very optimistic about growth opportunities in 2024 and remains on track to grow its restaurant base toward its long-term goal of 40,000 locations.
Diversified Menu Offerings: Restaurant Brands believes that new product development is a key driver of long-term success for its brands and will continue to be in focus. This is expected to drive traffic by expanding the customer base, spreading out into new dayparts, and continuing to build brand leadership in food quality and taste.
During third-quarter 2023, Popeyes US witnessed 5.6% growth in same-store sales and a 5.0% increase in net restaurants. This led to a notable 11% growth in system-wide sales. The upside can be attributed to the strength of the sandwich platform and the introduction of Ghost Pepper Wings, resulting in a record digital sales mix of around 25% and the highest chicken QSR traffic share in over two years.
Focus on Digitalization: QSR has been focusing on enhancing its digital experiences by incorporating delivery and payment options within its digital platforms. The company's consistent investments in expanding delivery through digital platforms and rolling out the scan and pay feature bode well. This integration paves the path for better guest convenience and improved speed of service (in the drive-thru).
During third-quarter 2023, digital sales increased more than 40% year over year, courtesy of strong contributions from kiosks and delivery. The company showcased strong digitalization efforts and continued to drive growth for its Tim Hortons brand, with 5 million average monthly users and a consistent digital sales mix of approximately 30% in the quarter. The company remains optimistic about the growth of digital sales in international markets, backed by various service modes.
Other Key Picks
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Shake Shack Inc. SHAK presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.
It has a trailing four-quarter earnings surprise of 80.8%, on average. The stock has gained 24.4% in the past year. The Zacks Consensus Estimate for SHAK’s 2024 sales and earnings per share (EPS) suggests an increase of 15.2% and 40%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. ARCO currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 28.3%, on average. The stock has rallied 42% in the past year.
The Zacks Consensus Estimate for ARCO’s 2024 sales and EPS indicates a 10.6% and a 15.5% rise, respectively, from the year-ago period’s levels.
The Gap, Inc. GPS currently sports a Zacks Rank of 1. It has a trailing four-quarter earnings surprise of 137.9%, on average. The stock has surged 66.4% in the past year.
The Zacks Consensus Estimate for GPS’ fiscal 2024 sales suggests an improvement of 0.9% but the same for EPS suggests a decline of 2.8% from the year-ago period’s levels.
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