On Wednesday, KeyBanc Capital Markets adjusted its outlook on Restaurant Brands International (NYSE:QSR), increasing the price target to $85 from the previous $82 while maintaining an Overweight rating on the stock.
"We are reiterating our OW rating as we believe QSR stock remains undervalued vs. peers and see the valuation gap continuing to narrow over time'', KeyBanc analyst noted.
The firm's confidence in the company is bolstered by its performance in the first quarter of 2024, which showcased stronger-than-anticipated global same-store sales (SSS) growth. This growth is particularly notable at Tim Hortons in Canada, where mid-single-digit positive traffic growth was observed, and at Burger King in the U.S., which experienced relatively stable traffic growth, outpacing the overall industry rate.
Restaurant Brands International's recent financial results have demonstrated robust profit dollar flow-through on a consolidated level, despite some margins falling short of expectations in the Tim Hortons supply chain. The company has also confirmed its target for net restaurant growth at a mid-4% rate and anticipates an additional $15 million in general and administrative (G&A) expense savings within the current year.
In response to these developments, KeyBanc has made slight upward revisions to its earnings per share (EPS) estimates for Restaurant Brands International for the years 2024 and 2025, now forecasting $3.38 and $3.90 respectively. These adjustments reflect anticipated improvements in home market same-store sales momentum, store-level profitability, and the impact of cost-saving initiatives.
The revised price target of $85 by KeyBanc is based on a multiple of 21.8 times the firm's projected EPS for 2025. Restaurant Brands International's continued solid performance and strategic initiatives appear to support the investment firm's positive stance on the stock's value relative to its peers, with expectations for the valuation gap to narrow progressively over time.
InvestingPro Insights
As Restaurant Brands International (NYSE:QSR) garners a favorable outlook from KeyBanc Capital Markets, real-time data from InvestingPro further enriches the narrative. The company's market capitalization stands at a robust $33.08 billion, underlining its significant presence in the industry. With a Price/Earnings (P/E) ratio of 19.07, QSR trades at a premium, which is supported by its consistent dividend increases over the past 9 years, signaling confidence in its financial stability. Moreover, the company's commitment to shareholder returns is evident as it has maintained dividend payments for 10 consecutive years.
InvestingPro Tips reveal that although QSR is trading at a high P/E ratio relative to near-term earnings growth, the company is expected to remain profitable this year, a sentiment echoed by analysts. This profitability is substantiated by the company's solid performance over the last twelve months. For investors seeking a deeper dive into Restaurant Brands International's financials, InvestingPro offers additional tips, which can be accessed through a subscription. Use coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, and gain access to a total of 7 InvestingPro Tips for QSR that can guide investment decisions.
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