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When Bad News Isn’t Bad

Paul Price says investors are missing the point following Restaurant Brands International's latest results.
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Here’s the thing to consider when you look at Restaurant Brands International  (QSR) - Get Restaurant Brands International Inc Report: Investors often have unrealistic expectations, and that can make even a thriving business look like a disappointment. 

“Only on Wall Street can projected all-time record results be treated as "bad news." Paul Price wrote recently on Real Money.  "However, that was the case ... with Restaurant Brands International."

Restaurant Brands' third-quarter earnings per share were 70 cents (GAAP) and 76 cents (adjusted) versus 47 cents a year earlier. Despite the big gain, somewhat subdued management guidance knocked down full-year 2021 estimates from $3.00 to about $2.83.

"Next year's EPS figures now are expected to come in around $3.25 versus the $3.35 expected prior to the latest news. Yet both years likely will still set new EPS records."

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Price notes that “Restaurant Brands management wisely went to an almost 100% franchised status a few years back. Less than 1% of units are now company-owned. International sales were about 11% of revenue in 2020.”

He added that there has been "enormous growth over the past seven years for Restaurant Brands and ... relatively huge un-reflected value waiting to be regained by shareholders.”

Yet despite all of this, QSR’s stock price has taken a steady march down over the past six months. From a high near $70 per share it now sits in the mid-$50’s.

Paul Price sees this as an opportunity in waiting for investors.

“What more do you need to know? Buy some QSR shares, sell some LEAP puts or consider doing both.” 

Get more trading strategies and investing insights from the contributors on Real Money.