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YUM! Brands (YUM) Up 27% in 6 Months: Will the Rally Continue?
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Yum! Brands, Inc. (YUM - Free Report) is likely to benefit from unit expansion, digital efforts and refranchising initiatives. Also, increased focus on third-party delivery services bodes well.
In the past six months, shares of YUM! Brands have gained 26.6% compared with the industry’s 25.4% growth. Moreover, an upward revision in earnings estimates for fiscal 2021 reflects analysts’ optimism regarding the company’s growth potential. Over the past 30 days, the Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 1% to $3.87 per share.
Factors Driving Growth
YUM! Brands aims to revamp its financial profile and thereby improve the efficiency of its organization and cost structure globally. It believes that a “slimmer Yum Brands” would lead to efficiency gains.
Considering its existing footprint of 50,000 restaurants worldwide, YUM! Brands believes it can roughly triple its current global presence over the long term. During the third quarter, the company opened 556 gross new restaurants. It also opened restaurants in China, Asia, the United States, Russia and Thailand. Moreover, master franchise agreements in Brazil (Taco Bell), Spain (Taco Bell) and Russia (Pizza Hut) and international growth alliance with Telepizza along with consolidate franchisees in Latin America and the Caribbean are likely to drive growth in the near future.
Meanwhile, the company continues to focus on various digital initiatives and refranchising efforts to tide over the ongoing crisis. Notably, the company continues to deploy technology to enhance guest experience.
To this end, the company has implemented various digital features in mobile and online platforms across all brand segments. It is also continuing the transformation process toward a single point-of-sale system in the United States. Additionally, it updated its mobile app and Hut Rewards. At the end of third-quarter 2020, the company’s digital sales mix increased to more than 30% of system sales. Moreover, its partnership with online food delivery platform Grubhub is likely to boost online sales and delivery in the upcoming periods.
Also, the company has adopted a de-risking strategy by reducing its ownership of restaurants through refranchising. We note that refranchising a large portion of the system reduces the company’s capital requirements and facilitates earnings per share growth and ROE expansion.
Other top-ranked stocks in the same space include Jack in the Box Inc. (JACK - Free Report) , Ruth's Hospitality Group, Inc. and FAT Brands Inc. (FAT - Free Report) . Jack in the Box sport a Zacks Rank #1, while Ruth's Hospitality and FAT Brands carries a Zacks Rank #2.
Jack in the Box has a three-five year earnings per share growth rate of 10.6%.
Ruth's Hospitality and FAT Brands’ earnings for 2021 are expected to surge 264.6% and 127%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
YUM! Brands (YUM) Up 27% in 6 Months: Will the Rally Continue?
Yum! Brands, Inc. (YUM - Free Report) is likely to benefit from unit expansion, digital efforts and refranchising initiatives. Also, increased focus on third-party delivery services bodes well.
In the past six months, shares of YUM! Brands have gained 26.6% compared with the industry’s 25.4% growth. Moreover, an upward revision in earnings estimates for fiscal 2021 reflects analysts’ optimism regarding the company’s growth potential. Over the past 30 days, the Zacks Consensus Estimate for its fiscal 2021 earnings has moved up 1% to $3.87 per share.
Factors Driving Growth
YUM! Brands aims to revamp its financial profile and thereby improve the efficiency of its organization and cost structure globally. It believes that a “slimmer Yum Brands” would lead to efficiency gains.
Considering its existing footprint of 50,000 restaurants worldwide, YUM! Brands believes it can roughly triple its current global presence over the long term. During the third quarter, the company opened 556 gross new restaurants. It also opened restaurants in China, Asia, the United States, Russia and Thailand. Moreover, master franchise agreements in Brazil (Taco Bell), Spain (Taco Bell) and Russia (Pizza Hut) and international growth alliance with Telepizza along with consolidate franchisees in Latin America and the Caribbean are likely to drive growth in the near future.
Meanwhile, the company continues to focus on various digital initiatives and refranchising efforts to tide over the ongoing crisis. Notably, the company continues to deploy technology to enhance guest experience.
To this end, the company has implemented various digital features in mobile and online platforms across all brand segments. It is also continuing the transformation process toward a single point-of-sale system in the United States. Additionally, it updated its mobile app and Hut Rewards. At the end of third-quarter 2020, the company’s digital sales mix increased to more than 30% of system sales. Moreover, its partnership with online food delivery platform Grubhub is likely to boost online sales and delivery in the upcoming periods.
Also, the company has adopted a de-risking strategy by reducing its ownership of restaurants through refranchising. We note that refranchising a large portion of the system reduces the company’s capital requirements and facilitates earnings per share growth and ROE expansion.
Zacks Rank & Other Key Picks
Yum! Brands currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other top-ranked stocks in the same space include Jack in the Box Inc. (JACK - Free Report) , Ruth's Hospitality Group, Inc. and FAT Brands Inc. (FAT - Free Report) . Jack in the Box sport a Zacks Rank #1, while Ruth's Hospitality and FAT Brands carries a Zacks Rank #2.
Jack in the Box has a three-five year earnings per share growth rate of 10.6%.
Ruth's Hospitality and FAT Brands’ earnings for 2021 are expected to surge 264.6% and 127%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>