3 Unique Catalysts On The Horizon For Restaurant Brands

Restaurant Brands International Inc QSR is seeing three unique catalysts that led Oppenheimer to upgrade the stock to Outperform with a $70 price target.

Announcements of Unit Growth Acceleration

Oppenheimer's Brian Bittner analysis shows that the company’s accretive cap-structure opportunities aren’t appreciated. Bittner believes Restaurant Brands recent Popeye’s acquisition could drive the company’s unit growth to the 7 percent range, well above its competitors 2.5 percent average.

Popeye’s Acquisition

The $1.8 billion acquisition of the No. 2 chicken player Popeye’s provides a massive new growth pipeline for Restaurant Brands already big global network, consisting of 22,000 units. Popeye’s, with 2,700 units lags far behind KFC’s 21,000 units worldwide. According to Oppenheimer, Popeye’s footprint is underpenetrated despite its No. 2 status.

“When 3G acquired BK in 2010, unit growth was only 150/year vs 700+/year now. We expect similar enhancements to Popeye’s under QSR’s global franchisee roster, which could boost QSR’s unit growth to ~7%,” said Bittner.

Burger King and Tim Horton Are Strong Assets

Burger King and Tim Horton’s consists of 90 percent of Restaurant Brands profits. These strong franchised-assets are strong sales drivers that can improve trends from Q1’s trough, according to Oppenheimer.

Oppenheimer EPS estimates in FY 2018 is 30 cents higher than Wall Street consensus of $2.42. This number includes accretion from redemption of high-cost preferred stock that is redeemable in December, through “smartly secured sources of cash” and refinancing 2014 Notes that are callable in October.

Shares of Restaurant Brands were up 3 percent Wednesday at $59.13.

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