3 Restaurant Stocks to Avoid As Americans Begin to Cut Spending

2. Restaurant Brands International Inc. (NYSE:QSR)

Number of Hedge Fund Holders: 23

Restaurant Brands International Inc. (NYSE:QSR) operates as a quick service restaurant company that owns brands like Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs. Morgan Stanley analyst John Glass on July 18 cut the price target on Restaurant Brands International Inc. (NYSE:QSR) to $52 from $56 and reiterated an Underweight rating on the shares. The analyst slashed estimates for the second half of 2022 and 2023 across much of his restaurant and foodservice distributors coverage ahead of Q2 earnings to price in weakening sales as consumers suffer from rising inflation. 

According to Insider Monkey’s data, 23 hedge funds were bullish on Restaurant Brands International Inc. (NYSE:QSR) at the end of March 2022, compared to 24 funds in the previous quarter. Bill Ackman’s Pershing Square is the largest position holder in the company, with 23.8 million shares worth about $1.4 billion. 

Here is what Pershing Square Capital Management has to say about Restaurant Brands International Inc. (NYSE:QSR) in its Q4 2021 investor letter:

“QSR is a high-quality business with significant long-term growth potential trading at a highly discounted valuation.

Comparable sales have recovered or are well on their way to recovery.

Tim Hortons Canada improved to a mid-single-digit decline during Q3 relative to 2019.

Burger King U.S. under new leadership and poised to make a recovery.

Burger King International and the Popeyes brand continue to grow well with strong same-store sales growth relative to 2019 levels. As underlying sales trends recover, QSR’s share price should more accurately reflect our view of its business fundamentals.

Management continuing to make investments for future growth.

Digital: G&A investment to modernize digital platforms and loyalty programs.

New Units: Return to historical mid-single-digit unit growth in 2021 and beyond.

Brand Acquisitions: Purchased Firehouse Subs for $1bn in December.

Remains cheap relative to intrinsic value and peers.

Trades at less than 18x our estimate of 2022 free cash flow per share.

The company began repurchasing shares in August.

As underlying sales trends recover, QSR’s share price should more accurately reflect our view of its business fundamentals. QSR’s share price increased 3% in 2021 and has decreased 7% year-to-date in 2022.”