Traffic trends for quick-service brands have been stagnant or negative in recent quarters due to the pandemic and a squeezed consumer wallet.
However, analysts at BMO Capital Markets expect traffic to turn positive soon as COVID-recovery comps are lapped and inflation finally eases.
The QSR Analyst: To that end, BMO’s Peter Sklar upgraded Restaurant Brands International Inc QSR — the parent company of Tim Hortons, Burger King and Popeyes — to an outperform rating, and raised the price target to $72.
Sklar upgraded Restaurant Brands based on the improving momentum of those three brands, which contribute 45%, 43%, and 10% to overall EBITDA, respectively.
Historically, Sklar noted that it has been rare for all three brands to align with improving performance momentum at the same time, with the stock typically held back by whichever one underperforming brand.
One of the major reasons for this improvement is that Tim Hortons is benefitting from a trade-down, as consumers opt for more affordable "treats" such as cold beverages and lunch/afternoon dayparts.
Tim Hortons app activity has seen a slight uptick in usage in Q4/22 compared to Q3/22, while usage at competitors like McDonald's Canada and food delivery apps has seen slight declines.
Additionally, BK U.S. is gradually narrowing the gap versus its peers, thanks in part to the appointment of Tom Curtis as President in August 2021.
Check out more analyst ratings, here.
Placer.ai's mobility traffic data shows that Burger King U.S. has steadily narrowed the traffic gap versus peers, and over the past couple quarters, Burger King U.S. has managed to meaningfully narrow its sales comp gap versus McDonald's.
Popeyes U.S. continues to grow, attracting new customers with new locations through menu innovation and digital channels.
A number of international agreements undertaken in the past two years could also begin to produce results.
Overall, Sklar noted these improvements across all three major banners bode well for the future of Restaurant Brands.
Price Action: Shares of Restaurant Brands International Inc gained 1.84% to trade at $66.80, according to data from Benzinga Pro.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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