Why Investors Are Eating Up Restaurant Brands International A better-than-expected third quarter performance and a super-sized leadership announcement have traders bidding Restaurant Brands International stock back up.

This summer, few investors were ordering shares of fast food chain operator Restaurant Brands International Inc. (NYSE: QSR). With gasoline prices soaring, fewer road trips meant fewer stops at Burger King, Tim Hortons, Popeyes, and Firehouse Subs.

Toss in a side of increased food and labor costs and the company's earnings suffered. By June 2022, french fries and chicken strips weren't the only things getting dipped as the stock dipped below $50.

Since then, Restaurant Brands International has been one of the hottest large-cap names on the NYSE. A better-than-expected third quarter performance and a super-sized leadership announcement have traders bidding the stock back up toward its post-pandemic peak.

With a few trading days left, this month's volume is already at its highest level in two and a half years. And with many Americans cutting back on expensive sit-down meals, fast food businesses like Restaurant Brands International may continue to be appealing to consumers and investors alike.

How Did Restaurant Brands International Do in Q3?

Earlier this month, Restaurant Brands International posted adjusted earnings per share (EPS) of $0.96 which crushed the consensus estimate of $0.80. The 23% year-over-year improvement marked the company's best profit growth of 2022 and helped alleviate concerns about cost inflation.

The result was driven by higher same-store sales at all restaurants except the recently acquired Firehouse Subs. Overall revenue growth of 15% reflected increased demand for takeout, drive-thru and delivery — exactly the kind of multi-channel growth you'd like to see as an investor.

Growth was particularly strong at Burger King where the Royal Perks loyalty program attracted eaters with free food and upsizes. Loosened restrictions at the Canadian border also helped boost Burger King and Tim Hortons sales. The two restaurants are often housed under one roof along key travel corridors.

Even with higher menu prices, consumers appear to be finding relative value at Burger King, Popeyes and Tim Horton's. And with gas prices elevated and many people working from home these days, fast food deliveries are up significantly this year.

What Leadership Change Did Restaurant Brands Announce?

On November 16th, Restaurant Brands International announced that J. Patrick Doyle will be the company's new executive chairman. This was perceived as a big deal because Mr. Doyle is the former CEO of Domino's Pizza where he had a solid track record of innovation and growth.

RBI shares gapped up on the news and continued to climb to fresh 52-week highs. This was followed by a holiday-led low volume selloff that suggests the bulls remain in control.

In nine years as Domino's CEO, Mr. Doyle turned the pizza chain into a digital juggernaut by introducing new technologies that appealed to consumers and drove efficiencies. He led the company to 29 straight quarters of same-store sales growth.

At Restaurant Brands, investors are hoping he can boost digital sales and improve customer satisfaction, both of which have lagged competitors like McDonald's and Chipotle. They are also hoping a deeper commitment to investing in franchisees can lead to better profits. A simpler menu that streamlines ordering (similar to Domino's) could be a quick fix to improve margins.

In addition to bringing extensive quick-service restaurant industry experience to the table, Mr. Doyle is bringing his checkbook. He unveiled a plan to invest roughly $30 million in Restaurant Brands shares and hang on to them for five years. Talk about putting your money where your mouth is. This should reassure investors that he is in it for the long haul and confident in his ability to right the ship.

Does Restaurant Brands International Have More Upside?

Since the Q3 report and the addition of Mr. Doyle, Wall Street has been raising its earnings estimates for the current quarter and 2023. Despite the improved outlook, Restaurant Brands International's 30% surge off its October 2022 low means it is no longer on the value menu. The stock is trading at 22x earnings on a forward 12-month basis.

This doesn't mean, however, that the stock can't trend higher. Multiple expansion to the five-year historical average P/E ratio of 25x would get Restaurant Brands International to approximately $75 or 12% above current levels.

The Street has been raising its price targets to reflect the recent one-two news punch. Last week, Morgan Stanley played catch up in upgrading from Underweight to Market Weight with a $71 target. RBC Capital reiterated its buy rating and offered a Street-high $80 target.

To build off the recent momentum, though, Restaurant Brands will have to demonstrate continued progress with online sales and its ambitious international expansion goals. Over the long haul, it is targeting 40,000 locations across the portfolio.

Investors should take comfort in the recent results and appointment of the former Domino's CEO. Affordable comfort food is likely to keep consumer traffic trending up…while the stock's affordable valuation and dividend keep investors hungry for more gains.