TSX restaurant stocks to watch amid holiday season - Kalkine Media

December 07, 2022 08:24 AM EST | By Mridul Gogoi
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Highlights:

  • Restaurant Brands International posted Q3 2022 revenue of US$ 1,726 million.
  • Premium Brands Holdings holds a market cap of C$ 3.72 billion.
  • Food Group Inc distributed a quarterly dividend of C$ 0.21.  

The global economy suffered in 2022 as several macroeconomic factors have increased inflation. The central bank has been raising interest rates to curb inflation. Amid all this, how about eating out among people? Are they still splurging on restaurant bills at the pre-pandemic level? Has the restaurant industry been reeling under the pressure of an economic downturn and its stocks tumbling in a bearish market?

It doesn’t seem so. What generally happens is that restaurants pass the burden of inflation to customers and remain less impacted by the price rise.  

Here, we take a look at five restaurant stocks­- Restaurant Brands International Inc. (TSX: QSR), Premium Brands Holdings Corporation (TSX: PBH), MTY Food Group Inc. (TSX: MTY), Pizza Pizza Royalty Corp. (TSX: PZA), Maple Leaf Foods Inc. (TSX: MFI) and look at their recent performances:

Restaurant Brands International Inc. (TSX: QSR)

Restaurant Brands International is among the largest restaurant companies globally, spanning over 100 countries with over 28,000 restaurants. The EPS of the top restaurant brand is 4.07 and has a price-to-earnings (P/E) ratio of 22.20.

The US$ 27.33 billion market cap company paid a quarterly dividend of US$ 0.54 with a dividend yield of 3.322 per cent.

In its Q3 2022 earnings results, Restaurant Brands reported a total revenue (unaudited) of US$ 1,726 million compared to US$ 1,495 million in the year-ago quarter.

The company's net income in the reported quarter was US$ 530 million versus US$ 329 million in the same comparative period in 2021.

The diluted EPS of the company was US$ 1.17 in comparison to US$ 0.70 in the same quarter the previous year. The QSR stock jumped over 11.48 per cent year-to-date, and its last closing price was US$ 65.5 on December 6, 2022.

Premium Brands Holdings Corporation (TSX: PBH)

Premium Brands Holdings Corp manufactures and distributes premium food apart from engaging in wholesale businesses with businesses in British Columbia, Alberta. The company’s specialty food manufacturing segment contributes to almost two-thirds of the group revenue.

The C$ 3.72 billion market cap company Premium Brands announced a quarterly dividend of C$ 0.7, which is next payable on January 16, 2023. Its dividend yield is 3.369 per cent, while the three-year dividend growth stands at 8.71.

The P/E ratio of the C$ 3.72 million company is 3.76, while the price-to-book (P/B) ratio was 2.043.

Premium Brands Holdings posted a third-quarter 2022 revenue of C$ 1.62 billion, a 21 per cent increase compared to the third quarter of the previous year.

The company also registered a Q3 2022 adjusted EBITDA of C$ 141.2 million, a growth of 15.2 per cent from the corresponding quarter of 2021.

Premium Brands Holdings clinched adjusted EPS of C$ 1.37 per share in the reported quarter.

MTY Food Group Inc. (TSX: MTY)

MTY Food Group Inc is a key player in the quick service restaurant (QSR) and casual dining sector. It offers franchises and operates corporate-owned locations apart from selling retail products under several banners.

MTY Food Group has a market cap of C$ 1.44 billion. With a dividend yield of 1.424 per cent, the company distributed a quarterly dividend of C$ 0.21.

The restaurant company has an EPS of 3.78, while the P/E ratio stands at 15.90.

In Q3 2022, MTY Food’s cash flow from operating activities was C$ 36.8 million. The revenue in the third quarter of 2022 was C$ 171.54 million compared to C$ 150.80 million. The 14 per cent growth in its revenue was mainly due to an increase in food processing, distribution, and retail earnings in the reported quarter.

The MTY stock gained over 4.64 per cent in the past six months.

Market capitalization of QSR, PBH, MTY, PZA, MFI

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Pizza Pizza Royalty Corp. (TSX: PZA)

Pizza Pizza Royalty Corp deals in franchise quick-service restaurants under its Pizza Pizza Royalty Limited Partnership. The company has an employee headcount of 3,000 working in 600 traditional and non-traditional restaurants coast to coast.

The C$ 435.35 million market cap company has an EPS of 0.77, while its P/E ratio was 17.70. With a dividend yield of 6.208 per cent, the company distributed a monthly dividend of C$ 0.07 per cent.

In Q3 2022, Pizza Pizza Royalty Corp reported a 14.4 per cent increase in its adjusted earnings per share. The company said its restaurant network grew by five net locations in the reported quarter. The same-store sales in Q3 2022 for Pizza Pizza Royalty Corp saw a growth of 14 per cent.   

For the three months that ended September 30, 2022, the company registered an increase of 15.4 per cent in system sales from 727 restaurants to C$ 149.7 million compared to C$ 129.7 million in the year-ago quarter.

In the reported quarter, announced shareholder dividends of C$ 14.5 million or C$ 0.59 per share. It was C$ 12.4 million or C$ 0.505 per share in the same comparable period the previous year.

Maple Leaf Foods Inc. (TSX: MFI)

Maple Leaf Foods Inc deals in consumer-packaged meats, producing prepared meats and meals. Its products include fresh pork, poultry, and turkey products. The company also engages in agribusiness operations.

The C$ 2.99 billion market valuation company, Maple Leaf Foods had a quarterly dividend of C$ 0.20 and its dividend yield was 3.303.

Maple Leaf’s Q3 2022 total sales soared 3.6 per cent to C$ 1,231.9 million with an adjusted EBITDA margin of 6.2 per cent.

In its Meat Protein Group, the sales rose to C$ 1,194.5 million, a 3.8 per cent YoY growth. The company also reported a Q3 2022 net loss of C$ 229.5 million.

Bottom line:

One should do their due diligence before selecting their stocks and deciding on their portfolio. However, investing has been challenging in 2022, and no strategy seemed to have worked for investors. Every sector suffered losses this year, and restaurant stocks are no different. However, a long-term strategy will help traders avoid losses in the short term. Another important aspect is diversification, which might mitigate any risk in investing in a volatile market.

Please note, the above content constitutes a very preliminary observation based on the industry and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks.


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