On Friday, Guggenheim analyst Gregory Francfort upgraded Restaurant Brands International (NYSE:QSR) stock rating from Neutral to Buy, despite lowering the price target to $71 from $74. Francfort revised the earnings per share (EPS) estimates for the company to $3.63 for 2025 and $3.85 for 2026, down from the previous $3.72 and $4.00, respectively. The adjustment was made in light of recent pressures on the stock, which the analyst believes are now excessive. According to InvestingPro data, the stock is trading near its 52-week low of $59.85, with technical indicators suggesting oversold conditions.
The analyst pointed out that the stock is trading at less than 16 times the price-to-earnings (P/E) ratio based on the below-consensus 2026 EPS forecast. Current InvestingPro data shows a P/E ratio of 15.47x, with the company demonstrating strong revenue growth of 15.08% over the last twelve months. Francfort acknowledges the risks facing Restaurant Brands, including the potential impact of mortgage rate resets on the Canadian consumer, competition from McDonald's (NYSE:MCD) in the U.S., and the need for growth recalibration in China. However, he also noted that Patrick Doyle, the Chairman of Restaurant Brands, has been implementing strategic improvements that could lead to market share gains internationally in the upcoming quarters.
Restaurant Brands International's appealing dividend yield, which is nearing 4%, and a solid balance sheet were also cited as positive factors. Francfort mentioned that the new price target represents 18.5 times the projected 2026 EPS, a decrease from the previous multiple of 20 times the 2025 EPS.
The upgrade reflects Guggenheim's view that despite the lowered EPS forecasts and price target, Restaurant Brands International's current valuation does not fully recognize its growth potential and strategic initiatives under Chairman Patrick Doyle's leadership. The firm's analysis suggests that the stock may offer a favorable investment opportunity at its current valuation.
In other recent news, Restaurant Brands International (RBI) reported a modest growth in its third-quarter earnings for 2024. The company highlighted an increase in comparable sales and a substantial rise in net restaurant growth. Despite facing regional challenges, particularly in the U.S. and China, RBI remains optimistic about its long-term growth prospects.
Meanwhile, Bernstein, a market analysis firm, released an analysis on the U.S. restaurant sector, highlighting Chipotle Mexican Grill (NYSE:CMG) and Wingstop (NASDAQ:WING) for their exceptional value propositions. The firm suggested that the recent devaluation in the restaurant industry presents attractive investment opportunities, particularly in these companies.
On the other hand, KeyBanc adjusted its outlook on Restaurant Brands International, reducing the price target but maintaining an Overweight rating on the stock. The adjustment follows RBI's third-quarter results for 2024, which fell short of expectations. However, KeyBanc's analysis suggests that the current trading price of RBI's stock does not fully reflect the company's long-term growth potential.
These recent developments reflect RBI's resilience and strategic focus on digital sales, franchisee profitability, and international expansion. The company is working on improving performance in challenging markets and aims for over 8% organic adjusted operating income growth for the year.
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