What happened
Shares of Restaurant Brands International (QSR -1.45%) were up 10.1% in August, according to data provided by S&P Global Market Intelligence. The entirety of the outperformance for the stock is attributable to positive financial results for the second quarter of 2022.
So what
On Aug. 4, Restaurant Brands reported Q2 results, beating expectations on both the top and bottom lines. The company generated revenue of over $1.6 billion, up about 14% year over year. And it earned $346 million in net income -- down from the previous year but about $0.03 per share more than analyst estimates.
The analyst community responded positively to Q2 results from Restaurant Brands. For example, Baird analyst David Tarantino raised his price target for the stock by nearly 13% to $63 per share, according to The Fly. Tarantino specifically liked the strength of Restaurant Brands' Tim Hortons brand, which enjoyed Q2 same-store sales growth of 12.2%.
During Q2, Restaurant Brands' management also did what it could to grow shareholder value. It spent $165 million repurchasing shares. And it maintained its dividend by declaring a $0.54 per-share dividend that will be paid out in October.
Beyond Q2 results, there wasn't much news for Restaurant Brands. As the chart above shows, beyond the pop early in August, Restaurant Brands stock traded sideways for the month.
Now what
Restaurant Brands has more ways to create shareholder value than just repurchasing shares and paying a dividend. On Aug. 9, Argus analyst John Staszak upgraded Restaurant Brands stock to buy, in part due to the company's ongoing expansion opportunity. And indeed, the company intends to keep growing its portfolio even though it already has nearly 29,000 restaurant locations.
For starters, it plans to keep growing its hot Tim Hortons brand. It currently has over 5,300 locations, primarily in Canada where it's the top coffee brand. However, management is in the early stages of growing its presence in China and India, the two most populous nations in the world. Therefore, there's upside opportunity with this brand.
Finally, don't overlook the opportunity in Restaurant Brands' newest and smallest brand: Firehouse Subs. This chain only has a little more than 1,200 locations, with over 95% located inside the U.S.
Restaurant Brands acquired Firehouse Subs late in 2021 with express plans to leverage its large international presence to grow the Firehouse brand in foreign markets. I expect development to accelerate for Firehouse Subs in the near future as it approaches the one-year mark from the acquisition.
It probably won't be the fastest growing stock on the market. But with iconic brands like Burger King and Tim Hortons under its umbrella, and with nearly 29,000 locations, I still consider Restaurant Brands one of the safer investments in the stock market, capable of modest, steady returns over the long term.
