Restaurant Brands International (QSR-T)

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.

Since mid-2022, the chart shows higher highs and higher lows. 56% of revenues come from Tim Horton's. The 200-day moving average keeps rising. Offers 9% EPS growth, but at a high 23x forward PE, which is pricey for him. Also, they face competition from the larger McDonald's and Yum Brands.

Pretty happy with it, though Tim's app can be buggy. Well managed. Good collection of brands. Right now, firing on all cylinders. Stream of revenue of 4-6% from franchisees. Invests in growth and innovation. Takeover of largest Burger King franchisee in the world, Carroll's, should increase traffic and customer spend.

He doesn't set target prices as such. Rather, goes for companies with strong earnings and price momentum. Stock still has legs left in it.

Rebounding nicely since Covid. Operating quite well. Expanded product offerings. Depends on execution, as they've run into problems in the past and with franchisees. Decent 6% EPS growth, not overly exciting for him. He owns SBUX. Yield is 2.8%, nice.

Multi-brand platform. Growth challenged. New CEO from Domino's created excitement, stock popped. His concern is that pulling levers for a single brand is not the same as for 3-4. A show-me story, stock's range-bound. Spins off lots of cash. See his Top Picks idea for better valuation and growth.

Despite the popularity of weight-loss drugs, there remains demand for QSR restaurants in the U.S., making this a good long-term hold. The Canadian customer is more challenged, though. QSR has had a good run, so wouldn't buy or sell here.

Does not currently own stock, but likes company. Internationally one of largest restaurant companies in the world. Diverse cash flow basis. Excellent brand value that can weather a recession. Would recommend holding stock if already own it. Safe dividend yield around 3%.