Restaurant Brands International Inc. stock (NYSE: QSR) is one of the largest fast-food restaurant chains in the world and it is a combination of Burger King, Tim Hortons, Popeyes, and, since late 2021, Firehouse Subs. The company is scheduled to report its fiscal third-quarter results on Friday, November 3. We expect QSR’s stock to likely trade higher due to both revenues and earnings beating expectations marginally in its third-quarter results. In Q2, the company’s net restaurant growth was 4.1% during the quarter, with the Popeyes brand seeing the biggest increase in units on a percentage basis. The revenue stream of QSR is directly influenced by the system sales it generates across its brands, which can be increased by growing restaurant sales or adding as many restaurants as possible. Also, Tim Hortons, Popeyes, and Firehouse Subs are far less penetrated across international markets than McDonald’s or Burger King. That means more room to open new restaurants and a longer runway for revenue growth.
QSR stock has seen little change, moving slightly from levels of $60 in early January 2021 to around current levels, vs. a similar change for the S&P 500 over this roughly 3-year period. Overall, the performance of QSR stock with respect to the index has been quite volatile. Returns for the stock were -1% in 2021, 7% in 2022, and 4% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 9% in 2023 – indicating that QSR underperformed the S&P in 2021 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Staples sector including WMT, PG, and COST, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could QSR face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?
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