3 reasons why Restaurant Brands International is starting to look like tasty stock

After a long period of struggle, the situation may finally seem more International restaurant brands (NYSE: QSR), or RBI, the parent company of Tim Hortons, Burger King and Popeyes Louisiana Kitchen. The operator of the fast food chain has been in the news lately due to a promotional partnership with singer Justin Bieber, which boosts a variety of Tim Horton “Timbits” pastries dubbed “Timbiebs.”

However, while an endorsement from Justin Bieber could give RBI a temporary boost, the company also has several initiatives underway that should lead to a more sustainable rise. Here’s a look at three of them and why they’re optimistic for the company’s future growth.

1. Tim Hortons has positive traction

In March 2020, I identified Tim Hortons as The weakest link in RBI with a decrease in total brand sales and comparable sales (comps), even before the full impact of COVID-19 became clear. Today, however, RBI achieved a remarkable turnaround for its subsidiary, with Tim Hortons now a key driver of revenue growth and higher earnings before interest, taxes, depreciation and amortization (EBITDA), according to the company’s third quarter results. report.

Image source: Getty Images.

During the quarter, Tim Hortons’ network-wide sales growth totaled 11.1%. Comps increased 8.9% and the number of locations increased 4.1% year over year. Research firm Evercore ISI cited “a significant fundamental improvement of the brand […] including loyalty, digital marketing, food innovation and coffee improvement ”as the source of the upward trends in Tim Hortons sales.

The brand also shook hands on a potentially important international partnership at the end of November. Tim Hortons International Limited, also known as Tims China or THIL, is a private joint venture started by RBI and private equity firm Cartesian Capital Group. Tims China has just partnered with 20 million member food retailer Metro China and is opening its Tims Go cafes in Metro China stores. This will give the business greater visibility in popular and high traffic retail locations. With 335 outlets currently operational in the vast Chinese market, Tims China plans to “strategically open Tims Go cafes in METRO China stores in 60 cities, growing our brand, revenue and margins,” said the CEO. Yongchen Lu in a statement.

Tims China is also planning to go public through a ad hoc acquisition company (SPAC) merger, which could be of great benefit to RBI given its stake in the joint venture. Tims China has signed a contract with Silver Crest Acquisition Company for this transaction, and it will trade under the symbol “THCH” on the Nasdaq.

2. Burger King strengthens its position

RBI’s Burger King segment also saw significant year-over-year revenue and lineup growth in the third quarter, although lineups in its largest market, the United States, fell 1.6 %. This prevented the 16.2% international sales growth it recorded from having a greater impact on RBI’s bottom line and bottom line.

During the earnings call, CEO José Cil said that “the underperformance of value offers and […] our intentional abandonment of paper coupons “caused sales to decline in the United States. He also cited discount offers from competing restaurants as a negative factor, but added that RBI is striving to achieve” long-lasting sales. run through our digital platforms and by maximizing media firepower for its Burger King brand.

Burger King is also acting to increase drive-thru sales, an area of ​​significant competition with a pandemic-related shift in customer preference for drive-thru lanes. The RBI CEO confirmed at a conference Dec. 1 that Burger King’s drive-thru times are slower than some large competing restaurants, and the company plans to cut its drive-through menu to streamline choices. He remarked, “Considering the increase in volume in drive-thru, this is a very easy win in terms of additional volume in our business,” according to a CNBC report. Returning the burger brand to positive sales in the United States with this relatively simple change could help RBI achieve even better results.

3. RBI makes smart acquisitions

Restaurant Brands International appears to be reinvesting its successful earnings this year into further expansion through acquisitions. On November 15, he announced the purchase of the sandwich chain Firehouse Subs for $ 1 billion. Target’s 1,200 locations expand RBI’s menu offerings in a new direction with estimated sales of $ 1.1 billion in 2021 system-wide. Firehouse lineup has grown by around 20% year-to-date on a two-year basis. RBI expects the acquisition to be “immediately accretive” to its results.

RBI could also be part of a trio of large fast food companies looking to bid on Wagas, as Bloomberg reported. Wagas is a bakery and health food company in China with all the profit possibilities that come with a huge market in one country. The Chinese company appears to be seeking around $ 1 billion for its acquisition while currently generating around $ 188 million in annual sales. At this point, the possible offer has not been confirmed by RBI, but a successful deal would help accelerate any progress in China.

With various avenues of expansion underway, RBI is starting to look like a juicy investment among restaurant actions.

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Rhian hunt has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq and Restaurant Brands International Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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