4 Catalysts Driving A Bullish View On Restaurant Brands

Restaurant Brands International Inc QSR, the parent company of Burger King, Popeye's Louisiana Kitchen, and Tim Hortons, is among the small handful of companies that are expected to grow earnings in the face of sales and margin pressure, analysts at Credit Suisse said. As such, the firm's Jason West upgrades Restaurant Brands' stock rating from Neutral to Outperform with a price target boosted from $60 to $74.

Restaurant Brands' stock is also "reasonably valued" at current levels and is expected to show a cumulative 60-percent earnings per share growth through 2019, the analyst commented in the upgrade note. Accordingly, investors could benefit from a 40-percent total return in the coming years through a combination of the stock's appreciation, a steady dividend payment, and an expected $9.50 per share special dividend.

4 Catalysts

The analyst highlighted four catalysts to support his bullish stance.

First, the company will paydown in December its 9-percent preferred stock, which isn't reflected in consensus estimates and will be 55 cents accretive. Second, Tim Hortons' will likely benefit from a new franchisee relationship while sales trends remain strong according to the analyst's checks. Third, the company's most recent acquisition, Popeye's, is also expected to see accelerated growth.

Finally, the restaurant operator is expected to oversee a material capital return event at some point in 2018 and this will likely prove to be a special one-time dividend.

Bottom line, consensus estimates aren't fully reflecting the aforementioned catalysts, and as such, the stock's valuation is "cheaper than it looks."

At time of publication, shares of Restaurants Brands International were up 3.65 percent at $62.72.

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