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Yum! Brands’ Stock Falls after Mizuho’s Downgrade

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Aug. 18 2020, Updated 5:25 a.m. ET

Stock performance

Mizuho’s downgrade appears to have led to a fall in Yum! Brands’ (YUM) stock price. Today, at 2:20 PM ET, the company was trading ~0.5% lower than the previous day’s closing price. The stock price also took a hit from weakness in the broader equity market with the S&P 500 Index down ~0.2%.

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Year-to-date performance

After returning 12.6% in 2018, Yum! Brands has continued its upward momentum in 2019 as well. Year-to-date, the company has returned 8.0% as of March 19. Peers Papa John’s (PZZA) and Domino’s Pizza (DPZ) have returned 18.0% and 0.3%, respectively. The Consumer Discretionary Select Sector SPDR ETF (XLY) has returned 13.4%.

Valuation multiple

The increase in Yum! Brands’ stock price since the beginning of 2019 has also raised its valuation multiple. As of March 19, the company was trading at a forward PE multiple of 25.4x, compared to 24.2x at the beginning of 2019. On March 19, Yum! Brands’ peers Papa John’s and Domino’s Pizza were trading at forward PE multiples of 39.1x and 25.6x, respectively.

Also, Yum! Brands is trading at 26.0 times analysts’ 2018 EPS estimate of $3.82 and 23.4 times analysts’ 2020 EPS estimate of $4.25. Its EPS are expected to rise 20.4% in 2019 and 11.2% in 2020.

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