On Wednesday, KeyBanc adjusted its outlook on Restaurant Brands International (NYSE:QSR), reducing the price target to $78 from the previous $80 while maintaining an Overweight rating on the stock. The adjustment follows the company's third-quarter results for 2024, which did not meet consensus forecasts, as the company grappled with macroeconomic and competitive hurdles.
Restaurant Brands International reported a third-quarter performance that fell short of expectations, leading to a revision of its full-year projections. Systemwide sales growth expectations have been moderated to between 5% and 5.5%, and unit growth estimates have been lowered to approximately 3.5%.
Despite the quarterly shortfall, the company maintains optimism for its long-term financial health, projecting over 8% adjusted operating income growth. It also reaffirmed its five-year outlook, which includes more than 8% systemwide sales growth and 5% unit growth on average through 2028.
The company observed an uptick in same-store sales (SSS) across its portfolio in October, transitioning from roughly flat to the low single-digit positive range. This improvement was led by the International, Burger King, and Popeye's segments. In light of the revised sales and unit growth for the current year and 2025, KeyBanc has also adjusted its 2025 earnings per share (EPS) estimate for Restaurant Brands to $3.77.
KeyBanc's analysis suggests that the current trading price of Restaurant Brands International's stock, at approximately 18 times their projected 2025 EPS, does not fully reflect the company's growth potential over the long term. The Overweight rating indicates KeyBanc's positive stance on the stock despite the recent adjustments.
In other recent news, Restaurant Brands International (RBI) disclosed its third-quarter earnings for 2024, demonstrating modest growth in the face of market challenges. The company reported a slight 0.3% increase in comparable sales and a notable rise in net restaurant growth. Key highlights include the successful integration of its new Restaurant Holdings segment and a continued focus on digital sales, which now represent nearly 20% of total sales.
RBI also reported increased franchisee profitability with 4-wall EBITDA reaching $205,000 and an adjusted EPS increase of 4.6% to $0.93, generating $485 million in free cash flow. However, certain brands experienced challenges, such as Burger King and Popeyes in the U.S., which saw a decline in comparable sales.
Looking ahead, RBI expects full-year 2024 system-wide sales growth to be between 5% and 5.5% and aims for over 8% organic adjusted operating income growth for the year. Despite regional challenges, particularly in the U.S. and China, RBI remains optimistic about its long-term growth prospects. These recent developments reflect RBI's resilience and strategic focus on digital sales, franchisee profitability, and international expansion.
InvestingPro Insights
Recent InvestingPro data provides additional context to Restaurant Brands International's (NYSE:QSR) current financial position and market performance. The company's P/E ratio stands at 17.52, which aligns closely with KeyBanc's observation of the stock trading at approximately 18 times projected 2025 EPS. This valuation is supported by a robust revenue growth of 15.08% over the last twelve months, with an even more impressive quarterly revenue growth of 24.71% in Q3 2024.
InvestingPro Tips highlight that QSR is trading at a low P/E ratio relative to its near-term earnings growth, suggesting potential undervaluation. This aligns with KeyBanc's view that the current stock price may not fully reflect the company's long-term growth prospects. Additionally, QSR has maintained dividend payments for 10 consecutive years, demonstrating financial stability despite recent challenges.
It's worth noting that QSR is trading near its 52-week low, which could present an opportunity for investors who share KeyBanc's optimistic long-term outlook. The stock's dividend yield of 3.4% may also attract income-focused investors.
For those seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide deeper insights into QSR's investment potential.
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