Restaurant Brands International Inc. QSR will likely benefit from expansion efforts, loyalty programs and menu innovation. However, supply chain disruptions and declining traffic from pre-pandemic levels are of concern.
Let’s discuss the factors outlining why investors should hold the stock for now.
Factors promoting growth
Restaurant Brands believes there is a huge opportunity to grow all of its brands globally by expanding its presence in existing markets and entering new markets. The company is confident in the long-term growth prospects of the Tim Hortons brand and remains committed to delivering on its international growth strategy to expand the brand around the world. In addition, the company’s business prospects in Canada seem promising. Evidently, the company has formed Master Franchise Joint Venture (MFJV) partnerships for the brand in Mexico and Spain. Additionally, the company is optimistic about the major expansion opportunity for the brand in India. The company continues to focus on the 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 plans to open more than 200 new locations in North America.
The company’s loyalty program is gaining popularity. Restaurant Brands said after a rapid ramp-up phase, nearly half of customers are paying through Tim’s Rewards. During the first quarter of 2022, the company reported continued traction from the respective brands’ loyalty programs. With significant progress in user experience and gaining more active users, the company is optimistic about its potential for the respective brands in the long run. The company intends to integrate loyalty programs into digital boards to derive synergies.
Restaurant Brands is relentlessly focused on its goal of driving traffic and revenue to its restaurants through core product platforms, continued focus on balanced menu design, expanding delivery business, offerings promotions, efforts to grow the breakfast portion and product launches.
During the first quarter of 2022, the company made solid progress in its main products with ingredients. In the Burger King segment, the company demonstrated a balanced approach to menu innovation by modernizing the HOME OF THE WHOPPER. To that end, the company unveiled a new $5 Meal Your Way featuring a Double WHOPPER Jr. Additionally, it added three flavors and included the product to its flame-grilled selection for a limited time. Positive customer reviews have been seen thanks to a reasonable price coupled with strong messaging and high-quality advertisements (especially on its digital platforms). In the Popeyes segment, the company benefited from the expansion of the chicken sandwich platform with the launch of Buffalo Ranch Chicken Sandwich. Additionally, he witnessed a positive contribution from the launch of his $6 Big Box. The company intends to focus on streamlining its menu to create efficiencies, improve customer experience and drive profitable sales.
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Shares of restaurant brands are down 19.5% over the past year, compared to 18.1% for the industry. The decline was caused by the coronavirus crisis. Pandemic-induced restrictions, labor issues and supply chain disruptions weighed heavily on the company. Although most food services are open, traffic is still low compared to pre-pandemic levels. The company intends to monitor the situation regularly to assess the impacts of COVID-19.
Zacks ranking and key picks
Restaurant Brands currently carries a Zacks Rank #3 (Hold). You can see the full list of today’s Zacks #1Rank (Strong Buy) stocks here.
Some top-ranked stocks in the Zacks Retail-Wholesale sector are Dollar Tree Inc. LTRD, BBQ Holdings, Inc. barbecue and Arcos Dorados Holdings Inc. ARCO.
Dollar Tree sports a No. 1 Zacks rank. The company has a four-quarter earnings surprise of 13.1% on average. Shares of the company have gained 69.7% over the past year.
Zacks consensus estimate for Dollar Tree sales and earnings per share (EPS) in 2022 suggests growth of 6.7% and 40.5%, respectively, from year-to-date levels former.
BBQ Holdings carries a Zacks rank #2 (buy). BBQ Holdings has long-term earnings growth of 14%. Shares of the company are down 34.7% over the past year.
Zacks’ consensus estimate for BBQ Holdings’ sales and EPS in 2022 suggests growth of 46.1% and 67.6%, respectively, from year-ago period levels.
Arcos Dorados carries a Zacks rank of #2. Arcos Dorados has long-term earnings growth of 34.4%. Shares of the company are up 12.8% over the past year.
Zacks consensus estimate for Arcos Dorados sales and EPS in 2022 suggests growth of 16.6% and 83.3%, respectively, from prior year period levels.
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