Restaurant Brands International
Restaurant Brands International (QSR), the parent company of Burger King, Popeyes Louisiana Kitchen, and Tim Hortons, is up 27% YTD (year-to-date), driving significant gains for Pershing Square. The company has also outperformed the broader markets (SPY) (QQQ) in the same period.
QSR inexpensive relative to peers
During its first-quarter earnings call, Pershing Square Holdings said it believes that while QSR’s stock price has appreciated significantly in 2019, “it’s very inexpensive relative to the business quality and its long-term prospect.” To put this into context, the fund further elaborated that QSR is trading at just 24x times this year’s free cash flow per share, while its peers McDonald’s (MCD) and Yum! Brands (YUM) are trading in the high 20s despite growth rates that are lower than QSR’s. Pershing believes that QSR’s opportunity to grow its unit costs around the world combined its strong operational skills should allow it to see a high rate of growth over time.
QSR’s investor day
QSR’s management hosted its first investor day on May 15. The company highlighted the sustainability of its long-term growth and announced a long-term target of 40,000 units in eight to ten years. Its stock responded favorably to the presentation.