Q: The quarterly report today obviously surprised the market and the stock is down strongly. Mngmt blames it primarily on (beef) inflation. I'm having trouble thinking of what catalyst(s) could move it to the upside, so I'm thinking of selling it.
Do you think the dividend is at risk going forward? Do you think earnings/free cash flow will increase? What do you think of the report?
Do you think the dividend is at risk going forward? Do you think earnings/free cash flow will increase? What do you think of the report?
5i Research Answer:
We wouldn't be too concerned with the dividend given operating cash flows at QSR.
The company does have a tough road ahead of it. Revenue growth is expected to be in the sub 5% range for the next few years. In fairness, EPS growth is expected to be closer to 9%. Meanwhile, at 16X forward earnings, given the growth, we don't think shares are expensive but we also might not consider it 'clearly' cheap either. We might be a bit agnostic on it. We don't see an urgent need to change a position but might view it as a source of cash for other opportunities.