Is Restaurant Brands International (QSR) Trading at a Discount to its Peers?
Pershing Square Holdings, an investment holding company, released its first half 2024 investor letter. A copy of the same can be downloaded here. It has been a productive year for Pershing Square, despite a slight decline in performance year-to-date through August 13, 2024. The Company’s NAV per share, including dividends, climbed by 5.7% during the first half of 2024 and fell by 2.3% for year-to-date through August 13, 2024, and its share price increased by 14.7% and decreased by 2.9%, respectively. The S&P 500 increased by 15.3% and 14.9% over the same period. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Pershing Square Holdings highlighted stocks like Restaurant Brands International Inc. (NYSE:QSR) in the second quarter 2024 investor letter. Restaurant Brands International Inc. (NYSE:QSR) is a quick-service restaurant company that operates through Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK), and Firehouse Subs (FHS) segments. The one-month return of Restaurant Brands International Inc. (NYSE:QSR) was 5.34%, and its shares gained 5.79% of their value over the last 52 weeks. On August 21, 2024, Restaurant Brands International Inc. (NYSE:QSR) stock closed at $72.23 per share with a market capitalization of $32.491 billion.
Pershing Square Holdings stated the following regarding Restaurant Brands International Inc. (NYSE:QSR) in its Q2 2024 investor letter:
"Restaurant Brands International Inc.'s (NYSE:QSR) two largest brands delivered impressive results this quarter. Tim Hortons’ same-store sales in Canada grew by nearly 5%, outpacing all competitors and the broader industry. These strong results are due to the multi-year investment the company has made in broadening its food platform and expanding its lead in cold beverages. Burger King International reported same-store sales of more than 2%, despite ongoing boycotts of western brands. Burger King is outperforming McDonald’s on a one-year basis and relative to pre-covid levels. Its success in international markets provides a blueprint for its ongoing turnaround in the U.S., where the company is focused on modernizing its store base and growing its digital business. As part of that effort, the company acquired Carrols, Burger King’s largest franchisee, which will allow the company to accelerate remodels and help shift the franchise system towards smaller more entrepreneurial operators, setting the brand up for long-term success. The company intends to refranchise the Carrols restaurants to smaller operators once the stores are performing at strong levels.
In light of weakening economic conditions and ongoing boycotts, the company lowered its net restaurant and system-wide sales growth outlook this year. In response, the company is enacting a cost savings program which will enable it to grow operating profits by more than 8%. While an uncertain environment may impact unit growth in the near-term, we believe each of the company’s brands will benefit in a slower economic environment with consumers trading down.
Despite strong performance at its largest brands, consistent operating profit growth, and a business model that benefits in a recessionary environment, QSR still trades at a meaningful discount to its peers. As the company returns to its historic mid-single-digit unit growth and delivers consistent performance at each of its brands, we believe the company’s share price will more accurately reflect its improving fundamentals."
A close-up of a hamburger, french fries, and a soft drink, representing the fast food chain.
Restaurant Brands International Inc. (NYSE:QSR) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held Restaurant Brands International Inc. (NYSE:QSR) at the end of the second quarter which was 22 in the previous quarter. Restaurant Brands International Inc.'s (NYSE:QSR) global comparable sales increased by 1.9% in the second quarter and its global system-wide sales increased by 5%. While we acknowledge the potential of Restaurant Brands International Inc. (NYSE:QSR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Restaurant Brands International Inc. (NYSE:QSR) and shared the list of largest publicly traded food companies in 2024. Pershing Square Holdings shared in its 2023 annual report that Restaurant Brands International Inc. (NYSE:QSR) has entered a new phase of growth, driven by recent investments. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.