Yum! Brands Posts Q2 Beat

• Yum! Brands Inc. (NYSE:YUM) is a significant player in the fast-food industry, competing with giants like McDonald's and Burger King.
• Loop Capital Markets has maintained a "Hold" rating for YUM, with a current stock price of $127.31.
• YUM is nearing a potential Golden Cross, indicating a possible upward trend in its stock performance.

Yum! Brands Inc. (NYSE:YUM) is a global leader in the fast-food industry, owning popular chains like KFC, Pizza Hut, and Taco Bell. These brands are known for their wide range of menu offerings and global presence. Yum! Brands competes with other fast-food giants like McDonald's and Burger King, striving to maintain its market share and customer loyalty.

On January 8, 2025, Loop Capital Markets maintained its "Hold" rating for YUM, with the stock priced at $127.31. A "Hold" rating suggests that analysts believe the stock will perform in line with the market or its peers. This rating indicates that investors might not expect significant gains or losses in the near term.

YUM is nearing a potential Golden Cross, a bullish technical indicator. A Golden Cross occurs when a short-term moving average crosses above a long-term moving average, signaling a potential upward trend. This could suggest a positive turnaround in YUM's stock performance, attracting investor interest.

Currently, YUM's stock price is $127.66, a slight decrease of $0.89 or -0.69%. The stock has fluctuated between $127.01 and $128.23 today. Over the past year, YUM has seen a high of $143.20 and a low of $124.76, indicating some volatility in its stock price.

YUM's market capitalization is approximately $35.63 billion, reflecting its significant presence in the fast-food industry. With a trading volume of 397,096 shares on the NYSE today, investor activity remains steady. This level of trading volume suggests continued interest in YUM's stock, despite recent price fluctuations.

Wells Fargo analysts changed their rating for Yum! Brands (NYSE:YUM) from Overweight to Equal Weight, adjusting the price target from $150.00 down to $135.00.

The analysts explained that the rationale for the downgrade is based on the assessment that the optimistic outlook for 2023, which was based on accelerating comparable sales, unit growth, and improving margins, has mostly materialized. Looking ahead to 2024, they anticipate challenges due to a comparatively high benchmark set by the previous year's performance, recent indicators of slowing momentum, and a less promising set of catalysts for 2024.

Despite acknowledging Yum! Brands' strong long-term growth drivers, the analysts foresee a potential slowdown in customer traffic, a moderation in pricing gains, and less likelihood of outperforming the company's 8% profit algorithm in 2024. Their earnings per share estimate for 2024 is slightly below the consensus, partly due to Yum! Brands' decision to halt share buybacks as it focuses on debt repayment.

Wells Fargo analysts changed their rating for Yum! Brands (NYSE:YUM) from Overweight to Equal Weight, adjusting the price target from $150.00 down to $135.00.

The analysts explained that the rationale for the downgrade is based on the assessment that the optimistic outlook for 2023, which was based on accelerating comparable sales, unit growth, and improving margins, has mostly materialized. Looking ahead to 2024, they anticipate challenges due to a comparatively high benchmark set by the previous year's performance, recent indicators of slowing momentum, and a less promising set of catalysts for 2024.

Despite acknowledging Yum! Brands' strong long-term growth drivers, the analysts foresee a potential slowdown in customer traffic, a moderation in pricing gains, and less likelihood of outperforming the company's 8% profit algorithm in 2024. Their earnings per share estimate for 2024 is slightly below the consensus, partly due to Yum! Brands' decision to halt share buybacks as it focuses on debt repayment.

Yum! Brands (NYSE:YUM) plunged nearly 4% yesterday after the company reported its Q1 earnings results, with EPS of $1.06 coming in worse than the Street estimate of $1.13. Revenue was $1.65 billion, compared to the Street estimate of $1.62 billion.

The three largest brands delivered high-single-digit comp growth, with momentum carrying forward into Q2. However, higher-than-anticipated expenses weighed on margins and drove the EPS miss.

According to the analysts at RBC Capital, the headwinds are temporary and they expect the company to continue to post strong (over 20%) earnings growth for the balance of the year.

Yum! Brands (NYSE:YUM) reported its Q4 earnings last week, with EPS of $1.31 coming in better than the Street estimate of $1.26. Revenue was $2.02 billion, beating the Street estimate of $1.92 billion.

Following the company’s December 2022 Analyst Day, investors have been given a clear roadmap for what to expect from a growth perspective in the coming years, and management's creditability around execution remains quite high.

Exiting the quarter, the analysts at Deutsche Bank don't expect to see much in the way of changes to the debate or to the broader discussion around the story. The analysts believe YUM continues to screen as one of the best-positioned names for this environment and over the long-term, and they continue to like the "defense + offense" combination that it offers to investors.

RBC Capital analysts provided their views on Yum! Brands, Inc. (NYSE:YUM) following the company’s 2022 Investor Day, which largely met their expectations, particularly around unit growth.

The company introduced its new long-term guidance framework, including annual system-wide sales growth of over 7% (vs. prior mid-single to high-single-digits), driven in large part by an updated over 5% global net new unit growth target (vs. prior 4-5%).

The company’s management remains confident in the company's long-term unit growth potential, driven by both domestic and international growth across the company's portfolio of brands.

The analysts raised their fiscal 2023 EPS estimate to $5.30 from $5.14. As a result, their price target moved to $132 from $128, while the Sector Perform rating was reiterated.