Restaurant Brands (TSX:QSR) Earnings Report: Is the Stock Worth Buying?

This top restaurant stock has been plunging since its earnings report came out, and investors need to know whether the stock is worth buying right now.

| More on:

Restaurant Brands International (TSX:QSR)(NYSE:QSR) released its Q3 2021 earnings report almost two weeks ago at writing, and it led to the stock beginning a deep dive into a sell-off frenzy that continues right now. At writing, the stock is trading for $71.24 per share, down by almost 7% from October 22, 2021.

The broader market has generally performed well throughout 2021, barring a few rough patches. The recent most sell-off frenzy for Restaurant Brands stock has left many investors wondering whether they should consider unloading any shares of the company they own or holding on to dear life despite the significant downturn for the stock in such a short time.

Today, we will take a closer look at the stock to see if it has become an undervalued stock due to the sell-off or if the correction was overdue and reflects a fair representation of the company’s long-term potential.

The possibility of moving past the pandemic

COVID-19 and the ensuing lockdown measures to curb the spread of the novel coronavirus have wreaked havoc across several industries worldwide, including disruptions in supply chains that will become more apparent during the incoming holiday season.

It is just a matter of time until we move into a post-pandemic world. The end of the global health crisis — or at least a significant reduction in the threat it poses — could also mean the end of the shortages and supply chain disruptions that have affected many companies.

Businesses that have managed to adapt to the situation and retain a relative degree of operational stability will be well-positioned to ride the unpredictably choppy waters through to the other side. Unfortunately, many companies will still feel the impact of the pandemic-induced headwinds. Restaurant Brands International stock is currently facing such challenges today.

The short-term challenges despite solid long-term prospects

Labour shortage issues created by pandemic-induced conditions have taken a toll on Restaurant Brands International. The fast-food giant has three massive names under its belt: Burger King, Popeyes Louisiana Kitchen, and Tim Hortons.

The fast-food giant saw its revenues rise by over 11% year over year to US$1.5 billion in its latest quarter, representing an improvement in its sales and overall revenues during the quarter. However, its quarterly revenues fell short of analyst expectations. Despite COVID-19-related concerns, almost all of the company’s restaurant locations worldwide remained open during the quarter.

But it has not all been bad news for RBI stock. The company’s adjusted earnings rose by almost 12% in the quarter, slightly beating analyst expectations. RBI stock also reported a net profit margin increase from the previous quarter. Despite decent long-term prospects and solid fundamentals, short-term challenges created by supply chain disruptions and labour shortages could be major contributors to its significant downturn.

Foolish takeaway

The pandemic has not been easy for restaurants and many other businesses. RBI stock has not let the challenges phase its expansion plans. The company plans to add more locations to increase its restaurants from 27,000 worldwide to 40,000 within the next decade.

The growth strategy appears to be aggressive and could contribute to medium-term issues. However, the plan suggests the potential for stellar shareholder returns in the long run. As the stock trades for a massive discount from its pre-pandemic levels, it could be worth buying right now despite the recent sell-off.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Restaurant Brands International Inc.

More on Dividend Stocks

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Earn $2,000 in Passive Income in 2025 With Less Than $51,000 in Savings

You can invest in Canadian high yield stocks via the Vanguard FTSE Canadian High Yield Dividend ETF (TSX:VDY).

Read more »

monthly desk calendar
Dividend Stocks

This 7.8% Dividend Stock Pays Out Every Month

Not all monthly dividend stocks are created equal. And this top stock is certainly a strong choice for passive income.

Read more »

A worker gives a business presentation.
Dividend Stocks

Is TMX Group Stock a Buy, Sell, or Hold for 2025?

TMX Group (TSX:X) stock has been a consistent wealth-builder, generating 4,630% in total returns since 2002. Should you buy, sell,…

Read more »

Man data analyze
Dividend Stocks

2 Deeply Undervalued Dividend Stocks to Buy in November

Here are two stocks that I view as deeply undervalued this November.

Read more »

Dividend Stocks

The 2 Best Canadian Blue-Chip Stocks to Buy Now

Blue-chip stocks can be some of the best stocks to have in any portfolio. But when they're trending upwards, investors…

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

Here Are My Top 3 Dividend Stocks to Buy Now

These top dividends stocks have consistently paid and increased their dividends. Further, this trend will continue.

Read more »

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »

how to save money
Dividend Stocks

The Smartest Dividend Stocks to Buy With $200 Right Now

These smartest dividend stocks can consistently pay and increase their dividends in the coming years, irrespective of the macro uncertainty.

Read more »