Restaurant Brands International (QSR-T)

She scores it 6 out of 10 for value and fundamentals, and it's on her watch list. Likes it. Sees 11.5% upside. Analysts are mixed, though. A lot depends on the future economy---will benefit as interest rates decline and people eat out more.

Tough business. Tim's has benefited from return to office post-pandemic. Historically, management was intent on cost-cutting. Hadn't done much innovation or product investment, but now focusing on that. 

In the space, she owns MCD.

Tim Horton's is doing okay, but Popeye's and Burger King face problems. The latter is taking longer to revamp, but the locations they already changed see better comps. QSR can bounce back and can buy other companies.

Well positioned. Inflation's coming down. Demand for fast food is not going away. Obesity drugs won't be a permanent detriment to the space. Tim's is a cash cow, and that's what you want in terms of free cashflow generation.

Burger King was lower but Tim's did OK. Burger King's spending a lot of $$ to revamp stores, but seeing good returns from stores already renovated with foot traffic up about 4.3%. Great brands that they improve on. Decent dividend. Worthwhile owning here.

Discretionary spending is coming down and the whole restaurant business would turn down in a weaker economy. She likes trade down economics where consumers go to cheaper alternatives for the same product. For example if a coffee at Starbucks is too expensive then customers might choose a lower priced coffee at Tim Hortons..

Puzzling that stock's down, as Q1 results were quite strong, beating expectations and long-term guidance good. People are concerned about how low-income US consumer is going to be impacted by inflation. He recently went through the drive-thru and a Whopper is $8! 

Sees that a lot of chains are introducing value meals, which may get stock going again. Stock's really good value here.

Has been watching company closely. Recent weakness in share price a good place to buy. Weakness in consumers beginning to rear its head. Higher interest rates playing a role in reduced consumer spending. If share price goes low enough - a good time to buy. Overall, a strong business. Would recommend buying below $80. 

All the names have been performing well. Improved profitability in 2023 sets the stage for continued growth going forward. Focusing on menu innovation and digital transformation through mobile apps. Franchise business model offers stability and good cashflow visibility. Track record of increasing dividends and share buybacks. Yield is 3.1%, expected to grow modestly over the next few years.

Chart shows ascending pattern of higher highs and higher lows, technically solid. Shares outpacing the TSX since mid-2022. Seeing a 9-10% earnings growth rate.

QSR is now trading at 21x times' Forward P/E. In the 1Q-2024, QSR revenue grew 8% to $1.74B, beating estimates of $1.7B and EPS was $0.73 beating estimates of $0.72. The balance sheet has net debt of $12.3B, and a net debt/EBITDA of 4.8x. The leverage level has gone down slightly from last year of 5.1x. Comparable sales were solid across all brands except Firehouse, which the company recently acquired. Long-term guidance remains unchanged, which the company expects comparable sales to grow 3% with 5% restaurant growth on average until FY2028. Overall, we think the quarter was decent, and valuation is not too expensive relative to other restaurant names, and we are okay to add some here.
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Uncertainty is that previous changes were difficult because it's a multi-brand platform. Valuation is very reasonable. Very good growth profile and management. Balance sheet is not investment grade, and some don't care. He cares, as it's difficult to grow if you're not investment grade. Investment grade gives you much larger pool of people who can supply capital.

Likes it, but owns YUMC instead. YUMC wins from a valuation and growth perspective, but also has more geopolitical risk.

Just guided 3% same-store growth over 5 years. Are adding 5% new stores annually, buying back stock, and raising their dividend. Cheap PE vs. peers like McDonald's. The chairman is turning around QSR, like he did Domino's before.