Oppenheimer upgraded the owner of Burger King and Tim Hortons today

All figures in U.S. Dollars.

Analysts Brian Bittner and Michael Tamas from Oppenheimer boosted their rating on the stock to Outperform from Perform, with a $70 price target. They write that they’ve long viewed  the owner of the Burger King and Tim Horton franchises as attractive, but they think that now is a good time to buy, as they’ve recently upped their 2018 estimates and think the Street may be underestimating its earnings power.

From their note:

 Our math suggests base-case EPS in ’18E is $2.70+ vs. Street’s $2.42E (we model $2.72). This incorporates accretion from: 1) redemption of high-cost preferred stock (redeemable in December) using smartly secured sources of cash, and 2) refinancing 2014 Notes (callable in October). We exclude any operational upside from better SSS, cost improvements/synergies or unit growth acceleration.

In addition, they like the company’s recent acquisition of Popeye’s, which they see pushing its unit growth to about 7%, compared to 2.5% for peers. They also think that Burger King and Tim Hortons will see improving same-store sales trends.

More detail:

Popeye’s acquisition provides massive new growth pipeline for QSR’s 22,000- unit global network. Popeye’s 2,700 unit-footprint is under-penetrated yet still No. 2 global chicken player to KFC’s 21,000 units. When 3G acquired BK in 2010, unit growth was only 150/year vs. 700+/year now. We expect similar enhancements to Popeye’s under QSR’s global franchisee roster, which could boost QSR’s unit growth to ~7% (well above 2.5% franchised peers).

BK and TH (90+% of profits) are attractive assets. Both are 100% franchised with strong unit growth profiles (+5%), lean cost structures and efficient capex. The brands are well-positioned competitively with strong historical SSS performances. We also believe SSS are set to accelerate from 1Q’s flattish trend as comparisons materially ease, catalytic menu innovation rolls-in and technology opportunities unfold.

Restaurant Brands is up 2% to $58.58 in recent trading, and has gained nearly 23% since the start of the year.

Source: Barron’s