Restaurant Brands International (QSR) owns three major restaurant chains — Burger King, Tim Horton’s, and Popeye’s Louisiana Kitchen — and has more than 26,000 restaurants worldwide, notes John Staszak, an analyst with Argus Research.

We expect the company’s emphasis on drive-through purchases to boost revenue going forward. We also look for continued strong growth in sales and unit volume at Popeye’s, helped by its popular chicken sandwich.

In addition, we have a positive view of QSR’s master franchise joint venture agreements at Burger King, in which franchises are sold to the most successful and financially solid franchisees, and of the upgraded Burger King restaurants.

On April 30, the company reported adjusted 1Q21 EPS of $0.55, above the consensus estimate of $0.50 and up from $0.53 in the prior-year period.

The improvement reflected higher same-store sales at Burger King and Popeye’s, offset in part by weakness at Tim Horton’s. Overall EBITDA rose by 8.1% to $480 million, driven by an 8.5% increase at Burger King and a 9.3% increase at Tim Horton’s.

Overall revenue rose by $35 million to $1.26 billion, above the consensus estimate of $1.25 billion. The improvement reflected an increase in deliveries, drive-thru purchases, and takeout orders. We note that digital sales across all brands were strong.

We expect same-store sales at Tim Horton’s, which has reported lower comps in eight of the past nine quarters, to improve as management applies the operational strategies that have worked well at Popeye’s and Burger King.

Sales at Popeye’s have been solid, rising 5% in 1Q21, and we expect continued growth over the remainder of 2021 and in 2022. At Burger King, we expect results to improve as the chain focuses on drive-thru orders and expands its value menu.

Based on these factors, we are raising our 2021 EPS estimate to $2.84 from $2.80 and our 2022 estimate to $3.15 from $3.10.

In April 2021, the company raised its quarterly dividend by 2% to $0.53 per share, or $2.12 annually, for a yield of about 3.0%. Our dividend estimates are $2.12 (raised from $2.11) for 2021 and $2.16 for 2022.

QSR shares are trading near the high end of their 52-week range of $48-$71, and at 21.9-times our 2022 EPS estimate, below the peer average. However, we believe that they merit a higher multiple based on prospects for mid-single-digit unit expansion and a strong earnings recovery as the pandemic recedes.

Our new target price of $80 per share, combined with the dividend, implies a total potential return of 19% from current levels.

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