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With a market cap of $41.3 billion, Yum! Brands, Inc. (YUM) is a leading global restaurant company that operates well-known quick-service brands, including KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill. Headquartered in Louisville, Kentucky, the company has a presence in over 150 countries and territories, primarily through a franchise-driven model.
YUM shares have underperformed the broader market considerably over the past year. YUM has gained 12.6% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 20.7%. However, YUM’s prospects look appealing this year as the stock rose 9.3%, surpassing SPX’s 3.2% rise on a YTD basis.
Narrowing the focus, YUM has also struggled to keep up with the AdvisorShares Restaurant ETF (EATZ). The exchange-traded fund has gained about 27.3% over the past year. Yet, on a YTD basis, YUM’s solid gain surpasses the ETF’s 4.7% return.
On Feb. 6, YUM shares surged 8.1% after reporting solid Q4 results, with total revenue rising 16% year-over-year to $2.36 billion. Adjusted EPS grew 28% to $1.61, surpassing analyst expectations. The company saw an 8% increase in worldwide system sales, driven by 5% net new unit growth and a 1% rise in same-store sales. The company also announced a 6% dividend increase to $0.71 per share.
For the current fiscal year, ending in December, analysts expect YUM’s EPS to grow 8.2% to $5.93 on a diluted basis. The company’s earnings surprise history is mixed. It missed the consensus estimate in two of the last four quarters while beating the forecast on another two occasions.
Among the 27 analysts covering YUM stock, the consensus is a “Moderate Buy.” That’s based on six “Strong Buy” ratings and 21 “Holds.”
This configuration is less bullish than a month ago, with seven analysts suggesting a “Strong Buy.”
On Feb. 7, Barclays PLC (BCS) analyst Jeffrey Bernstein raised Yum! Brands’ price target to $165 from $162 while maintaining an “Overweight” rating. He noted the company’s Q4 results modestly exceeded expectations and anticipates another year of steady profit growth in 2025.
While YUM currently trades above its mean price target of $143.94, the Street-high price target of $162 suggests an upside potential of 10.5%.
