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Restaurant Brands International Inc QSR

Morningstar Rating
CAD 100.45 +2.25 (2.29%)
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Company Report

Biggest Restaurant Brands Set To Gain Market Share as Industry Navigates Tough Environment

As we gear up for the release of first-quarter earnings, our top picks in the restaurant industry remain wide-moat McDonald's and wide-moat Starbucks, trading at 14% and 19% discounts to our $312 and $105 fair value estimates, respectively. While industry traffic has been depressed for two years, both brands boast strong digital platforms that allow them to defend transaction frequency without indiscriminate national discounting, and both benefit from scale-driven cost advantages that should allow them to meet the needs of the increasingly value-sensitive consumer without sacrificing financial performance. These are the two most important factors, in our view, that will distinguish the best and worst performers in our industry coverage over the coming years. The industry looks fairly priced in aggregate, trading at a 3% premium to our market-cap weighted fair value estimates. The aggregate figure masks a very bimodal return distribution: Brands like narrow-moat Wingstop (up 108% annually) and wide-moat Chipotle (74%)—which boast strong unit economics and have taken material industry transaction share—have materially outperformed brands like no-moat Wendy's (down 9%) and narrow-moat Papa John's (down 17%), which have not. Those top-performing brands are fully priced, trading at material premiums to our intrinsic valuation (163% and 52%, respectively), suggestive of meaningful execution risk.

Price vs Fair Value

QSR is trading at a 3% discount.
Price
CAD 100.45
Fair Value
CAD 999.00
Uncertainty
Medium
1-Star Price
CAD 116.60
5-Star Price
CAD 89.30
Economic Moat
Tsrdrc
Capital Allocation
Mtlqmxy

Bulls Say, Bears Say

Bulls

Improvements in profitability across brands in 2023 sets the stage for stronger development appetite in 2024 and beyond.

Bears

Challenging turnaround efforts at QSR competitors (Pizza Hut, KFC) suggest that RBI's Reclaim the Flame initiatives at Burger King U.S. may not bear fruit.

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News

Trading Information

Previous Close Price
CAD 98.20
Day Range
CAD 98.25101.11
52-Week Range
CAD 84.73112.12
Bid/Ask
CAD 100.37 / CAD 102.20
Market Cap
CAD 31.48 Bil
Volume/Avg
474,246 / 629,832

Key Statistics

Price/Earnings (Normalized)
22.40
Price/Sales
4.70
Dividend Yield (Trailing)
2.99%
Dividend Yield (Forward)
4.22%
Total Yield
5.14%

Company Profile

Restaurant Brands International is one of the largest restaurant companies in the world, with approximately $43 billion in 2023 systemwide sales across a footprint that spanned more than 31,000 restaurants and more than 100 countries. The firm generates revenue primarily from retail sales at its company-owned restaurants, royalty fees and lease income from franchised stores, and from its Tim Hortons supply chain operations. Formed in 2014 after 3G Capital’s acquisition of Tim Hortons International, the Restaurant Brands portfolio is split between Burger King (7,144 units), Tim Hortons (4,525 units), Popeyes Louisiana Kitchen (3,394 units), Firehouse Subs (1,265 units) and international franchise units of those banners (14,742) as of year-end 2023.
Sector
Consumer Cyclical
Industry
Restaurants
Stock Style Box
Large Growth
Total Number of Employees
9,000

Competitors

Valuation

Metric
QSR
YUMC
YUM
Price/Earnings (Normalized)
22.4018.5727.01
Price/Book Value
8.042.37
Price/Sales
4.701.425.60
Price/Cash Flow
21.188.5423.40
Price/Earnings
QSR
YUMC
YUM

Financial Strength

Metric
QSR
YUMC
YUM
Quick Ratio
0.881.190.99
Current Ratio
1.011.421.26
Interest Coverage
3.374.54
Quick Ratio
QSR
YUMC
YUM

Profitability

Metric
QSR
YUMC
YUM
Return on Assets (Normalized)
6.44%7.07%24.79%
Return on Equity (Normalized)
54.01%12.88%
Return on Invested Capital (Normalized)
9.94%7.47%55.35%
Return on Assets
QSR
YUMC
YUM
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Restaurants Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
MCD
McDonald's CorpZrqyzbxxtLhfp$198.7 Bil
SBUX
Starbucks CorpShbrgzqbQpss$99.8 Bil
CMG
Chipotle Mexican Grill IncNlxhygxqLqcf$79.1 Bil
CMPGY
Compass Group PLC ADRYbcczjctSppsppc$47.0 Bil
YUM
Yum Brands IncXmyfhtmgTsvp$39.1 Bil
QSR
Restaurant Brands International IncKklnfqwqGvnbpsz$22.9 Bil
DRI
Darden Restaurants IncKnllgvwptLtkhn$18.4 Bil
DPZ
Domino's Pizza IncYnbxlhwxzxGsjnq$16.4 Bil
YUMC
Yum China Holdings IncSdqtpmylFdlj$14.5 Bil
WING
Wingstop IncDvnxggcssQzmfkn$10.4 Bil

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