We recently published a list of 11 Best Fast Food Stocks To Invest In Right Now. In this article, we are going to take a look at where Restaurant Brands International Inc. (NYSE:QSR) stands against other best fast food stocks.
Fast food is integral to American culture and remains popular among adults and children. According to a report by the CDC, one-third of Americans consume fast food every day, while 83% of the country’s families dine out at a fast food restaurant at least once a week. Around 45% of the population aged between 20-39 consume fast food every day, while the indulgence rate of those between 40-59 years of age is slightly lower at 37.7%. On the other hand, 34% of children regularly eat fast food daily.
READ ALSO: 7 Cheap Food Stocks to Buy According to Analysts.
However, an increasing number of Americans are beginning to pull down on their consumption and eating less fast food per week due to high prices. A survey by Lending Tree in May 2024 highlighted that about 78% of the citizens consider fast food a ‘luxury’ after rampant inflation in the country has forced Americans to reassess their spending habits. Surge pricing in restaurants has also added to their worries, with about 72% confessing that they would prefer having fast food during discount hours.
Over the past year, menu prices have risen considerably in the US across the wider restaurant industry, driven by increased commodity and supply chain costs. This has boosted consumer desire in the country to eat at home. Carnegie Investment Counsel’s portfolio manager, Razmig Pounardjian, stated the following to Reuters in May:
“The lack of value offers has opened up consumers to shop for different options whether it be other (chains) or the grocery stores.”
Despite challenges, the American restaurant industry remains resilient, primarily because it adapts well to changing consumer habits. The National Restaurant Association has forecast sales to top the $1 trillion mark in 2024 for the first time. It also expects the industry to create 200,000 new jobs, citing what is generally a strong demand from Americans to eat at restaurants.
A restaurant ETF issued by AdvisorShares, which invests exclusively in the restaurant and food industry has gained 18.32% YTD, outperforming the broader market by over six percentage points, as of the close of October 31. The Fed rate cuts will likely help restaurant stocks as they would to the broader market. The low cost of borrowing will boost consumer spending and ease the burden on restaurant owners, allowing them to go ahead with their expansion plans.
In September this year, the Federal Reserve announced a 50-basis point rate cut – the first since March 2020 – to lower the range of interest rates from 4.75% to 5%. Details emerging from the minutes of the September meeting disclosed a ‘substantial majority’ of central bankers backing the cut, which has raised optimism among investors for further cuts ahead in the November meeting.
Another encouraging recent trend has been the downturn in the country’s inflation, which dropped to 2.4% in September and is inching toward the Federal Reserve’s goal of a two percent annual rate.
A close-up of a hamburger, french fries, and a soft drink, representing the fast food chain.
Our Methodology
We used Finviz’s restaurant industry screener to sample stocks for this article and then identified the companies that dealt with fast food. Among them, we picked the top 11 companies with the highest number of hedge funds having stakes in them. We ranked them in ascending order of hedge fund holders in each company. Data on hedge funds was sourced from Insider Monkey’s database of 912 hedge funds for the second quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Restaurant Brands International Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 22
Restaurant Brands International Inc. (NYSE:QSR) is a powerhouse in the restaurant industry. Headquartered in Toronto, Canada, it operates four major global food chains: Burger King, Tim Hortons, Popeyes, and Firehouse Subs. This diversified portfolio allows the company to target various customer segments across different markets.
In February, Restaurant Brands International Inc. (NYSE:QSR) declared its five-year growth outlook, under which it plans on having a minimum of 40,000 restaurants, $60 billion in system-wide sales, and $3.2 billion of adjusted operating income by 2028. As part of these efforts, Restaurant Brands International Inc. (NYSE:QSR) made two strategic acquisitions this year to further expand its already solid global footprint and bolster its revenue streams.
In May, the company announced that it had acquired Carrols Restaurant Group, Inc., the largest Burger King franchisee in the United States, having 1,023 restaurants across 23 states. It also operated 59 Popeyes restaurants in 6 states. The deal had a total enterprise value of around $1 billion. In addition to this, Restaurant Brands International Inc. (NYSE:QSR) would also spend another $500 million on reimaging over 600 Carrols restaurants before re-franchising them.
Later in June, the company announced two investments in China. The first involved the acquisition of Popeyes China from Tims China for an enterprise value of $15 million. The second was that it agreed to co-invest $50 million alongside Cartesian Capital to fuel the growth of Tims China.
These strategic investments in the world’s major quick-service restaurant markets have led to a bullish sentiment about the stock’s long-term potential. The company’s financial performance is also robust. During Q2 2024, Restaurant Brands International Inc. posted revenue of $2.08 billion, growing by over 17% year-over-year, due to a 5% increase in system-wide sales led by significant contributions from Tim Hortons and international operations. Adjusted diluted EPS was logged at 86 cents, representing an organic growth of 3.1% from last year.
Wall Street analysts have a consensus Buy rating on QSR and anticipate a share price upside potential, in median terms, of 18.6%. Restaurant Brands International Inc. (NYSE:QSR) is one of the best fast food stocks to invest in right now, with 22 hedge funds tracked by Insider Monkey having investments in the company, as of Q2 2024.
Overall, QSR ranks 7th among the 11 best fast food stocks to invest in right now. While we acknowledge the potential of fast food companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than QSR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.