Yum! Brands, Inc. (YUM) on Q1 2021 Results - Earnings Call Transcript
Operator: Good morning, and welcome to the First Quarter 2021 Yum! Brands, Incorporated Earnings Conference Call. Please note this event is being recorded. I'd now like to turn the conference over to Gavin Felder, Chief Strategy Officer and Interim Head of Investor Relations. Please go ahead. Gavin Felder: Thanks, operator. Good morning, everyone, and thank you for joining us. On our call today are David Gibbs, our CEO; Chris Turner, our Chief Financial Officer; and Dave Russell, our Senior Vice President and Corporate Controller. Following remarks from David and Chris, we'll open the call to questions. David Gibbs: Thank you, Gavin, and good morning, everyone. We've had a strong start to 2021 with solid same-store sales results on a 2-year basis and a meaningful uplift in unit development. This performance is a testament to the incredible focus and dedication of our restaurant teams, franchisees and above-store leaders around the world who are rising above the challenges presented by the pandemic to unlock new areas of growth such as digital and off-premise, while putting the needs of our customers and local communities first. I've always believed that our success will come from leaning into our core strengths and building new capabilities that enhance our ability to grow. And the way our business has navigated through COVID-19 has only reinforced this belief. This mindset is reflected in our Recipe for Growth and Good framework, which has successfully guided our strategy and will continue to serve as our north star. Our recipe highlights our unique strength as a company, notably, our iconic brands, our unmatched global scale, our diversified network of highly capable and well-capitalized franchisees and our unparalleled culture and talent. Chris Turner: Thank you, David, and good morning, everyone. Today, I'll discuss our first quarter results, our Unmatched Operating Capability and Bold Restaurant Development growth drivers and our strong liquidity and balance sheet position. To begin, let's discuss Q1. As David mentioned, overall Yum! system sales grew 11%, driven by 9% same-store sales growth and 1% unit growth. On a 2-year basis, same-store sales grew 2%, which includes the negative impact of about 2% of our stores being temporarily closed due to COVID as of the end of Q1 2021. EPS, excluding special items, was $1.07, representing a 67% increase compared to ex special EPS of $0.64 in Q1 2020. Core operating profit grew 33% in the first quarter. This performance is attributable to a stellar same-store sales growth in several developed markets at KFC, the combination of strong sales and restaurant margin growth at Taco Bell and a year-over-year benefit associated with reserves for franchisee accounts receivable. I'll now provide some additional color on several items. Starting with Taco Bell, we had another impressive quarter of profitability, where company restaurant margins were 24.1%, representing a 1.7% increase over prior year. As we've mentioned on previous earnings calls, we expect these margins to return closer to historical levels later this year as check averages normalize, dining room patronage increases and we adjust staffing levels at our restaurants as a result. During Q1, we continued to see recoveries of amounts past due at KFC International and Pizza Hut U.S. These recoveries resulted in a $6 million net benefit to operating profit related to bad debt during the quarter, representing a $34 million year-over-year tailwind to operating profit growth as we lapped $28 million of expense in Q1 2020, while we ended 2020 with $12 million of full year bad debt expense, we had large quarterly swings last year due to COVID. As such, we expect year-over-year operating profit growth to continue to be impacted as we lap bad debt expense of $13 million in Q2 and bad debt recovery of $21 million and $8 million in Q3 and Q4, respectively. While difficult to forecast, at this point, we don't expect bad debt to significantly impact our year-over-year operating profit growth on a full year basis. Most importantly, our franchisees are generally on solid financial ground despite the uncertainties caused by COVID. We recently completed the restructuring of our largest Pizza Hut U.S. franchisee NPC. that resulted in Flynn Restaurant Group joining the Pizza Hut family. We believe our franchisees are well positioned to partner with us as we look to accelerate out of COVID. General and administrative expenses were $206 million. We still anticipate the timing of full year 2021 G&A to be back-end-weighted as it has been historically. And we estimate that our consolidated G&A expenses will be slightly less than $1 billion for the full year 2021. Our commitment to be an efficient growth company that leverages fixed costs and utilizes our unique scale remains unchanged, and we expect our G&A ratio to move back toward our historical target as sustained growth resumes. Interest expense was approximately $131 million, an increase of 11% compared to Q1 2020, driven by write-offs of historical debt issuance costs and other one-time financing costs associated with the Q1 refinancing. Capital expenditures, net of refranchising proceeds, were $25 million for the quarter. As we mentioned on our last earnings call, we believe roughly $250 million in annual gross CapEx appropriately balances the inherent needs of the business, with opportunities to invest in technology initiatives and strategic development of equity stores. We still anticipate at least $50 million in annual proceeds from refranchising, which will fund the strategic equity store investments. As a reminder, for 2021, we may be slightly higher than the $250 million gross CapEx amount to catch up spend on repair, maintenance and remodels delayed owing to COVID as well as selective strategic development in the U.S., primarily for The Habit Burger Grill, for which refranchising proceeds may not be fully realized this year. Now on to our unmatched operating capability growth driver, with so much of our sales now going through off-premise channels, our operations teams have been laser-focused on delivering a fast, enjoyable experience for customers. As a result, KFC U.S. improved their drive-thru speed by nearly 15 seconds in the quarter over last year. And Taco Bell U.S. delivered their fastest average drive-thru speed in 8 years, while serving a staggering 17 million more cars compared to the same quarter last year. Importantly, one-third of these additional cars served were digital orders, which typically carry a higher check value, not to mention an optimized customer experience. Additionally, we continue to make tangible progress on scaling our in-house built technology platform. During the quarter, we deployed the pickup and delivery ordering solution across all KFC U.S. restaurants, including the launch of our first ever custom-built KFC app. Early signs are highly encouraging, and this gives us confidence as we look to further optimize and scale the platform. Now moving on to Bold Restaurant Development, during the first quarter, we opened 660 restaurants and closed 225, resulting in 435 net new units. Most notably, KFC delivered 4% unit growth, with strength in China, India, Russia and Thailand. At Pizza Hut, we were pleased to add 71 net new units, reflecting a positive trajectory following the COVID-related dislocations and closures of last year. We still have more work to do, and there will be choppiness related to the uncertainty of COVID and our continuing transition to a more modern estate, but we are encouraged by strong unit economics in many markets and our resilient global franchise base. We are also proud to announce that, shortly after the quarter ended, we opened our first ever Taco Bell in Malaysia. Not only was this the 31st international market Taco Bell has entered, but it was the first market entry where all training and launch programs were conducted virtually, a real breakthrough by the amazing Taco Bell Asia team. Overall, we are pleased with the momentum at the end of 2020 and into the early part of 2021, and this increases our confidence that we can return to 4% annual unit growth sooner rather than later. In 2021, we are optimistic that we will accomplish at least 3% unit growth. Now for an update on our balance sheet and liquidity position as well as our latest thoughts on capital structure and priorities for capital allocation. First, we ended Q1 with cash and cash equivalents of approximately $560 million, excluding restricted cash. Consolidated net leverage was 4.9 times which returns us to our target of approximately 5 times. Second, we repurchased 2.6 million shares totaling $275 million at an average price per share of $106. Third, we executed a series of transactions that added resiliency to our business while balancing liquidity, flexibility and cost. During the quarter, we amended and extended our credit facility and refinanced our term loans. We also priced a new Yum! Brands, Inc. holding company bond, which closed on April 1, subsequent to quarter end. Proceeds from this new bond, which carries a coupon of 4.625% and matures in 2032 will be used to repay $1.05 billion of 5.25% restricted group notes due in 2026, which we intend to retire later in the second quarter. All combined, the transactions were leverage-neutral and importantly, allowed us to boost liquidity, lower interest going forward and extend maturities. As always, we will continue to look for opportunities to further optimize our capital structure, depending on market and business conditions. Lastly, our capital priorities remain unchanged; invest in the business, maintain a healthy balance sheet, pay a competitive dividend and return the remaining excess cash flows to shareholders via repurchases. With that, operator, we are ready to take any questions. Operator: Our first question comes from David Palmer from Evercore ISI. Please go ahead. David Palmer: Thanks. I will try to squeeze in a two-part question. Just really about the U.S. brands for KFC and Pizza Hut, I am particularly curious about Pizza Hut. But both of those brands have had a pretty good run during COVID, but they have also been doing some pretty good stuff on the marketing front lately, so new management and the like. So, I am wondering how you feel those brands are set up for post-COVID. Do you think they can lap me or flat coming out of this as they lap some of these COVID comparisons? And I think, particularly with regard to Pizza Hut, I think people are curious about the health of that system. And obviously, it’s a long way away now the concerns of 2019, the franchisee profitability if the unit closure is over, any sort of feelings about the long-term health of that business? Thanks. David Gibbs: Yes. Thanks Dave. I think you are right. KFC and Pizza Hut have done a tremendous job navigating this tricky environment over the last year. But very importantly, they have done a great job setting themselves up for future success. A lot of that, as you mentioned, good marketing, the rollout of the KFC sandwich, I mentioned it in my prepared remarks, but it bears repeating. That has been a very successful launch with a great product. It really is a winning product in the category, and we are excited about the impact that will have, along with Secret Recipe Fries that rolled out in the quarter. But on Pizza Hut specifically, the comment about health is also well put. The Pizza Hut franchisees over the last year, given the success they have had, the ability to close some of the underperforming dine-in stores that we have been trying to get out of, those – all of those moves together have strengthened their financial condition in a very big way and that sets them up for a much growth going forward. A big part of that is just the ownership of NPC, which we also mentioned, Greg Flynn and his organization taking over a good chunk of the Pizza Hut U.S. stores is a huge positive for the brand. They are great restaurant operators, great businessmen that has a great team underneath him, knows how to run restaurants as well as anybody in this country. And very excited about the impact he will have taking over those stores and improving their operations, fixing up the assets and growing the business. Operator: Our next question comes from John Glass from Morgan Stanley. Please go ahead. John Glass: Thanks and good morning. It was good to hear that unit growth is now sort of within the historical range, 3% this year, perhaps on the path back to 4%. Can you just drill down a little bit? One, just by brand, how you think that plays out? Obviously, you have led with KFC, but maybe there are some other opportunities within the other 2 brands this year. And also just thinking out over the next 2 years to 3 years, historically, you have led with KFC, but is there – has COVID changed the way you think – thought about the growth opportunity for the other 2 brands and maybe the balance of growth is going to be different going forward than it has been historically? David Gibbs: Yes. Thanks so much. Good question on development. And as we said, we were encouraged by the momentum at the end of last year and the momentum in Q1. Our expectation for all of our brands is to be growing units, and that’s been our history and will continue to be our expectation going forward. KFC, we think, has historically been strong, and we want it to continue to be strong. But we have high expectations for Taco Bell, Pizza Hut and The Habit. Common across all of them is we think strong franchisees, very strong unit economics that improve as the business rebounds from COVID, continued brand love from consumers and ability to serve them on an off-premise basis. Plus, you are seeing us now integrate digital into the formats. And so post-COVID, optimized formats in each of those brands. And so with that, coupled with our very strong development teams, we think supports us on that trajectory back. And so we have expectations that we see strength across all of the brands going forward from a development standpoint. Operator: The next question comes from Dennis Geiger from UBS. Please go ahead. Dennis Geiger: Great, thanks for the question. And wondering if you could talk a little bit more about Taco Bell and some of the brand strength and the franchisee strength that you have seen in recent quarters. David, I think you talked about some of the key drivers of strength in this most recent quarter. Just curious, on the go forward, some of the drivers you are most excited about, whether it’s digital, the loyalty program that you touched on, how that new products pipeline looks. And just as we think about the reopening developments and dynamics going forward, some of the headwinds may be from competition reopening, but also talk about kind of late night coming back, maybe breakfast coming back. Curious if you guys could speak to some of those tailwinds as well. Thank you. David Gibbs: Yes. And for Taco Bell, I think there is excitement across the board for everything they have done over the last year under Mark King’s leadership and the great talent that we have at the brand and with our franchise partners, one of the strongest franchise systems you will ever find. The international development story is one that bears mentioning in terms of the opportunities we have there. We are starting to see ourselves get to scale in some markets. We always know that when we get to about 100 units in a market that’s when you really can start to unlock development, leverage marketing dollars to really create a virtuous cycle and a better unit economic play. We are starting to see that happen in a few markets around the world, and I think we are excited about the upside there. But even in the U.S., we also are leaning more into development as the unit economics look great right now. The opportunities in the U.S. real estate landscape are there. And our franchise partners are financially healthy and eager to go after them in concert with our team and picking the right opportunities that make money for them. The progress that we have made over the last year on digital is also an important part of the Taco Bell story. We are coming out of 2020 with a great loyalty program and a lot of loyalty members. That progress was made last year as we increased our digital sales. That lays the foundation for more success going forward. We did this – the first digital-only promotion of the $5 Create Your Own Box. It’s a great example of how having that digital business increasing gives us new tools to grow sales. So, I think the brand is really hitting on all cylinders. The product innovation is there. Once again, they have got something out of fries for the quarter, and they have got a great pipeline of stuff coming down the road. And the future for Taco Bell is incredibly bright with accelerating development growth, a strengthening brand, a great leadership team, great franchise partners. Operator: The next question comes from David Tarantino from Baird. Please go ahead. David Tarantino: Hi, good morning. I wanted to come back to your outlook for unit growth. And I guess, if I look at the first quarter, I think 435 net openings is the highest you have achieved in perhaps at least 10 years, according to my model. But I am wondering if there was anything unique to the quarter that would have driven that strength. And if you can comment on how that strong start to the quarter kind of translates to your guidance of at least 3%, but not perhaps getting to that 4% run rate, that would be helpful? Thanks. David Gibbs: Yes. David, good question, if you look at Q1, I think a couple of things stand out. We had strong gross openings which were, in particular, driven by a few key markets in Asia, but general strength in openings across the board. You saw in the U.S., fewer closures. And in general, in the Pizza Hut global system, fewer closures than we had last year, which as we said in the prepared remarks, we think reflects a bit of a turn there, although there is still a lot of work to be done on the asset transformation, and there is still going to be choppiness from a unit standpoint in the Pizza Hut system. And so those are kind of what drove the shape of development in the quarter. As we said, there is still a lot of uncertainty going forward. If you get outside of the U.S., the COVID situation in certain countries is still very dire, and that leads to some unpredictability. That’s why we are not yet ready to commit to exactly when we can get back to the 4% number. But we do have enough confidence as we look at the current pipeline to say that we think we will be at the 3% number at least this year. But again, we have still got a fair bit of uncertainty out there given the global situation. Operator: The next question comes from John Ivankoe from JPMorgan. Please go ahead. John Ivankoe: Hi. Thank you. Chris, I think you touched on it briefly in your prepared remarks, but ticket drove the majority of quick service comps in 2020, just speaking for the category with ticket being hugely positive and transactions generally being negative. Can you comment – and this is, I guess, for the whole team – on your thoughts of maintaining that ticket as traffic returns or should we, by definition, be looking for a positive transaction environment, perhaps at least partially offset by negative ticket environment? And if you could talk about maybe some experience that you have seen in markets that have been reopened the longest in terms of that ticket traffic dynamic, if there is any differences in those markets that have been opened the longest relative to national average? Thanks. Chris Turner: Yes. Good question, John. And obviously with 290 brand country combinations it varies, a lot of this varies by each one of those. But in general, we are seeing as markets reopen, ticket come down a little bit. But the thing that determined a lot of our success going into this was our ability to serve family meals and serve larger tickets. So, the brands that had those options, like KFC buckets, and Pizza Hut meals for sharing, tended to do better. And we are not seeing that all go away. I think, as you think about the things that happened during COVID, accelerating trends, which ones of those are going to be sticky. I think we expect that ticket will come down from where it’s at, but I don’t know that it’s going return to its old levels. And we think that’s good. The same thing could be said for some of the digital business, the increases that we have had in digital, that’s going to be stickier and stay in our business. So even in the U.S., as we see dining rooms reopen, we are not seeing, for example, a decline in Taco Bell’s digital business. And so we are holding on to those gains. So yes, it’s probably fair to expect ticket to start to moderate. But not – I don’t know that it’s going to return to pre-COVID levels. Operator: The next question comes from Jon Tower from Wells Fargo. Please go ahead. Jon Tower: Awesome. Thank you. I appreciate it. I was just hoping you guys can tell us a little bit on the recent tech investments. I know David, you had mentioned that Kvantum has been in a couple markets so far. And Tictuk, if I am saying the name correctly, has been in about 900 stores outside of the U.S. So, I am curious to hear what you expect these platforms to deliver, and how you expect them to spread across the globe. What sort of unlock you are expecting for sales, and maybe perhaps dig into what you are seeing in those stores where the technologies been deployed versus stores where that hasn’t been the case? And if there is any incremental investment, perhaps on headcount, in order to see this opportunity scale-up across the globe? David Gibbs: Great, great question. So, we are excited about both of these acquisitions. If you think about the key areas of our technology strategy, they tied to two of those key areas, one being our e-commerce and technology platform. So, Tictuk enhances that by giving us one more way, one more channel for customers to easily access our brands, through channels like WhatsApp, social media, text messaging, we have had a really good success with it. And nearly 1,000 stores where we have already used Tictuk, and we have high expectations for that team, to continue to bring on new markets, and expand within each of the brands around the globe, we think it’s a great customer experience, really easy to reorder just a few seconds for those customers. So, we are excited about what it does on the platform. If you then think about another key area of our technology strategy, which is data and analytics and our ability to drive insights, Kvantum did squarely against that, brings a new capability in-house that many of our markets around the globe have used to optimize their marketing investments. And so we are excited that they are now continuing to serve more and more of our businesses internally. Both of these we think are high return, they are on the smaller side, but high return acquisitions. And importantly, they create a competitive advantage. And the reason we decided to acquire them is there is also the scaled economies that come from being able to apply their capabilities across the breadth of our global business. Chris Turner: Yes. And just one thing to expand on the return piece, we are buying these companies in order to improve our capability and provide services to our franchisees at the lowest possible cost that are really unique proprietary capabilities that we would have. They are not designed to drive a profit for Yum! We want to provide them at the lowest cost to our franchisees. The return for Yum! comes through top line growth in our franchise units, which leads to more royalty income. We think we have really got a great model here where we do these smaller acquisitions, but we can scale them across the world. They have almost no impact on our P&L initially, and then the return comes from growing sales and units improving franchise economics, which we all know is a virtuous cycle, which leads to more development and healthier franchisees is really our number one goal. Operator: Our next question comes from Brian Bittner from Oppenheimer. Please go ahead. Brian Bittner: Thank you. Good morning. As you analyze your different regions in country combinations for specifically for the KFC portfolio outside of the U.S., where are you in faxing store level volumes, having the biggest outperformance versus ‘19 levels? And on the flip side, where are you seeing the biggest underperformance versus 2019, just so we can maybe better understand what market recoveries are needed to drive a further acceleration in this positive to your trend that you are starting to see? David Gibbs: Sure, good question, Brian. I think all of this is actually fairly intuitive. Where we are seeing ourselves successful is for the most part in developed markets, like the U.S., Canada, Australia, the UK, for KFC, where they are ahead of the curve a little bit on vaccination, keeping the virus under control, people are back trading, and where our business is going into the pandemic had skewed more off-premise to begin with, and had well developed digital and tech capabilities. So, that trend is continuing for all the markets. Well, I think that’s something that we are pleased with is that where we were going, which usually we are a little bit ahead in developed market versus emerging markets is on point environment. So conversely, the other markets that are struggling, are the ones, perhaps where we had skewed more dine-in going into the pandemic, and where we have maybe government action that is limiting our ability to trade, for example, in some markets, I think, in India, we have got to close our stores now, at 3 o’clock in the afternoon, that’s obviously going to have an impact on our business. So, less mobility leads to less sales, but we know that those situations will work themselves hopefully out sooner rather than later, which is why I think long-term, we are still very confident in the international business and returning to even stronger growth. Operator: Our last question comes from Sara Senatore from Bernstein. Please go ahead. Sara Senatore: Thank you. Just a quick follow-up to an earlier question. And then another one there Quick Order technology. And the follow-up was, I think, to John’s question about tech acquisitions that specifically could us maybe talk about give some context in terms of maybe the success or what you have seen from previous acquisitions, I think like Quick Order, a couple of years ago, and just maybe how your technology strategy has or hasn’t changed as you think about build versus buy. And then any color, you can give on loyalty for Taco Bell, I know Pizza Hut has a loyalty program, anything you can tell me about your frequency, what that looks like when people join or average spend, just as loyalty programs become more pervasive, I am trying to figure out they are still having the same kind of impact on the business. Thank you. Dave Russell: Thanks, Sara. I will take the first part of your question on technology. If you think about it, we do ask ourselves the question of should we build the capability in-house, should we acquire it and bring it in-house or should we contract with an external provider. And we run that test, and we think about, gosh, we should have it in-house, if it is a strategic competitive advantage, with high switching costs, and we need to have that in-house. We then assess our ability to develop it versus, the speed of integrating and the opportunity to attract or find a great candidate to acquire. Obviously, our ability to develop in-house is terrific right now with Clay Johnson coming onboard over a year ago, plus the strong technology teams that we have at each brands. And that’s where you saw the success with the launch of our KFC U.S. e-commerce platform which will continue to expand to other parts of the business. The Tictuk and Kvantum acquisitions for the reasons we talked about earlier, we think it was the right thing given that we had already seen the success and the impact they have had on our system to bring those in-house. And we have got plenty of examples where we contract with service providers where it’s either a less strategic capability or the switching costs are low. So that’s how we think about that. And again, as David said, we drive return from these primarily by driving system sales growth and creating better unit economics for our franchisees, which furthers development in the long run. David Gibbs: Yes, in past acquisitions that we have done like Quick Order have really paid off not only being done as a Pizza Hut acquisition, but leveraging the talent and some of the IP across other brands. So this thing is really, got all sorts of synergies and benefits as if as we make the right acquisitions. We have also done acquisitions outside of tech, like we bought Collider, a consumer insights company, that has been enormously helpful in us navigating the marketing environment all around the world and making sure we stay connected with consumers. And Collider in particular is really excited about the acquisition we did with Kvantum which will help them come up with insights on the marketing side, and then implement those insights most efficiently using Kvantum’s algorithms. So, a lot of this stuff is going to start to create even more synergies as we put the – what we believe is going to be the greatest tech team in the restaurant industry together. On the loyalty side, clearly, the move to digital that we are seeing with the consumer – with our consumer base, really enables us to leverage loyalty in an even bigger way. So Pizza Hut, which has had a loyalty program for quite some time now, continues to see more and more of their business going through that loyalty program, driven by frequent users that love the program. That’s why I have mentioned earlier, I was so excited about seeing Taco Bell launch their loyalty program would be hard to do when their digital mix was pretty low. Now, that they have a much bigger digital mix. That’s a great backdrop for us to engage with loyalty on our Taco Bell customers. And just as we would expect, we are seeing those customers coming back more frequently. Excited about the program and seeing giving us a new channel to communicate with them, market to them and grow the business. David Gibbs: I guess, as the last question, I will just wrap up by saying we are all quite excited about Q1. But we know there is a lot more work to do. I think what you saw in Q1 just demonstrates the resilience of the business, how we are coming out of the pandemic in a lot of markets that are now getting to the other side of this stronger with a better foundation to grow. Evidenced by the development progress we are made in the quarter. But we all know this is a journey. We haven’t reached the finish line. We are not doing a victory dance. But we are very excited about the future. Appreciate everybody’s time today and look forward to talking to you on the next call. Operator: This concludes today’s conference. You may now disconnect.YUM Ratings Summary
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Yum! Brands Inc. (NYSE:YUM) Maintains "Hold" Rating Amid Potential Golden Cross
- 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.
Yum! Brands Cut at Wells Fargo
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 Cut at Wells Fargo
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 Posts Q2 Beat
Yum! Brands (NYSE:YUM), renowned for its ownership of KFC and Taco Bell, reported Q2 earnings of $1.41 per share, outperforming the analyst consensus estimate of $1.24.
One of the highlights of the company's report was the impressive same-store sales growth of 9%. KFC, in particular, achieved remarkable same-store sales growth of 13%, standing out as the highest among YUM's brands. This growth was notably driven by KFC's stores in China, where same-store sales soared by 32% year-over-year.
On the other hand, Pizza Hut's same-store sales growth of 4% was deemed disappointing by investors, despite the notable 25% increase in China. Taco Bell also experienced a 4% increase in same-store sales.
Yum! Brands' Stock Drops 4% on Q1 EPS Miss
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 Posts a Q4 Beat
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.
Yum! Brands 2022 Investor Day Review
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.
