Although the restaurant industry continues to suffer from labor shortages and sky-high prices, bookings have improved. According to OpenTable, restaurant bookings have soared 34% year-over-year. Restaurants have become an essential part of everyday personal and professional life for most.

Moreover, restaurants are adopting new digital solutions to offer customers advanced services, which should bolster growth. According to a Technavio report, the Restaurant Digitization Solutions Market is projected to grow at a CAGR of 16.3% from 2022 to 2026. In addition, the market size of the quick-service restaurant industry is expected to hit $826.89 billion in 2022.

Given the backdrop, investors might add fundamentally sound restaurant stocks McDonald’s Corporation (MCD) and Restaurant Brands International Inc. (QSR) to their watchlist this week.

McDonald’s Corporation (MCD)

MCD operates and franchises its restaurants in the United States and internationally. The Company’s segments include the United States (U.S.), International Operated Markets (IOM), and International Developmental Licensed Markets & Corporate (IDL).

On October 27, 2022, Chris Kempczinski, President and CEO, said, “Our third quarter 2022 performance demonstrated broad-based business momentum as global comparable sales increased nearly 10%. I remain confident in our Accelerating the Arches strategy as our teams around the world continue to execute at a high level.”

On September 14, 2022, MCD announced the establishment of a new facility, Speedee Labs, focused on driving the customer experience and supporting restaurant teams through innovation.

MCD’s revenues from franchised restaurants increased 4.6% year-over-year to $3.67 billion for the third quarter that ended September 30, 2022. Also, its total operating costs and expenses decreased 3.3% year-over-year to $3.11 million.

Street expects MCD’s revenue to increase 2.6% year-over-year to $23.55 billion in 2023. Its EPS is estimated to grow 5.2% year-over-year to $2.58 in 2023. It surpassed EPS estimates in three of four trailing quarters. Over the past month, the stock has gained 19.4% to close the last trading session at $278.40.

MCD has an overall B rating, which equates to a Buy in our POWR Ratings systems. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

MCD has an A grade for Quality and a B for Stability and Sentiment. Within the B-rated Restaurants industry, it is ranked #15 out of 44 stocks. Click here to see the additional POWR Ratings for Growth, Value, and Momentum for MCD.

Restaurant Brands International Inc. (QSR)

Headquartered in Toronto, Canada, QSR operates as a quick-service restaurant company in Canada and internationally. It operates through four segments: Tim Hortons (TH), Burger King (BK), Popeyes Louisiana Kitchen (PLK), and Firehouse Subs (FHS).

On November 3, 2022, José Cil, QSR’s CEO, said, “Our strong results this quarter, including 9% consolidated comparable sales growth and 4% net restaurant growth, reflects the strength of our diversified, global business model, strong free cash flow generation and benefits from our focused investments in key areas including operations, technology, marketing, franchising, and people.”

QSR’s total revenues came in at $1.73 billion for the third quarter that ended September 30, 2022, up 15.5% year-over-year. Its net income increased 62.9% year-over-year to $360 million. Also, its EPS came in at $0.17, up 67.1% year-over-year.

Analysts expect QSR’s revenue to increase 12.6% year-over-year to $6.46 billion in 2022. Its EPS is estimated to grow 11.3% year-over-year to $3.14 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past month, the stock has gained 16.4% to close the last trading session at $60.91.

QSR has an overall B rating, equating to a Buy in our POWR Ratings systems. It has a B grade for Stability, Sentiment, and Quality. It is ranked #9 in the same industry. Click here to see the additional POWR Ratings for Growth, Value, and Sentiment.

MCD shares were trading at $278.99 per share on Wednesday afternoon, up $0.59 (+0.21%). Year-to-date, MCD has gained 5.81%, versus a -19.55% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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