Restaurant Brands One Of The Few Dining Stocks With A Clear Path To Upside

Above Consensus 3Q

Analyst Will Slabaugh expects third-quarter earnings per share of $0.44, ahead of the $0.41 consensus estimate, and 2017 earnings per share of $1.91 versus the Street estimate of $1.77. The positive opinion is premised on cost improvement opportunities at Tim Horton's and in broader G&A and field efficiencies.

Soft Q3 Sales Likely, But Not A Worry

Stephens lowered its third-quarter BK-U.S. and Canada same-store sales estimate to a 0.5 percent drop from a 0.5 percent gain on soft industry sales. However, easier comparisons could be an offsetting factor, the firm noted.

Related Link: Domino's Pizza's Q3 Demonstrates Consistent Market Share Gains

Deals Unlikely Near Term

Though investors are bracing for the next likely acquisition, Stephens believes the company's debt load prevents it from making any meaningful deals in the near term. However, the firm sees scope for deals in late 2017 or 2018.

Franchised Model

The firm believes Restaurant Brands' franchised model will appeal to investors who seek to circumvent exposure to companies with same store sales volatility and cost inflation, especially that of labor costs, at restaurant level.

Forward Estimates

Stephens models 2018 earnings growth of 30 percent, plus, capping off three years of 20 percent, plus, adjusted earnings per share growth.

The firm has a price target of $52, with the valuation arrived at by placing a multiple of 25 times on the consensus earnings per share estimate of $2.29 for 2018 and discounting it.

At time of writing, shares of Restaurant Brands were up 1.7 percent at $45.59.

Full ratings data available on Benzinga Pro.