Yum! Brands’ Q2 Earnings: Analysts’ Reactions



Yesterday, Yum! Brands (YUM) reported its second-quarter results, beating analysts’ EPS and revenue expectations. Driven by its expanded delivery service, menu innovations, and value offerings, the company’s global SSSG (same-store sales growth) of 5.0% beat analysts’ estimate of 3.1%. To learn more,  read Yum! Brands Stock Rose on Impressive Q2 Performance.

Yum! Brands’ strong second-quarter SSSG and initiatives appear to have led analysts to raise their price targets for its stock:

  • Stifel raised it from $100 to $110.
  • Credit Suisse increased it from $106 to $115.
  • Jefferies raised it from $93 to $110.
  • BMO increased it from $98 to $112.
  • BTIG increased it from $114 to $130.
  • Cowen and Company raised it from $118 to $129.

Of the 25 analysts covering Yum! Brands, 56% recommend “hold,” 36% recommend “buy,” and 8% recommend “sell.” Their average 12-month target of $111.19 for the stock implies a 4.9% fall from its August 1 price of $116.94.

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Yum! Brands’ stock performance and valuation

Thanks to the company’s impressive second-quarter performance, Yum! Brands stock hit a 52-week high of $119.72 yesterday. It closed the day at $116.94, 3.9% higher than its previous closing price. This performance is significant considering that broader equity markets fell due to US-China trade tensions worsening. The Dow Jones Industrial Average and S&P 500 fell 1.1% and 0.9%, respectively.

This year, YUM stock has risen 27.2%, outperforming peers and the broader equity market. Domino’s Pizza and Papa John’s have returned -0.9% and 10.5%, respectively, this year. The S&P 500 has risen 17.8% year-to-date.

The increase in Yum! Brands’ stock price has raised its forward PE multiple to 28.7x. The company’s strong SSSG and improving margins have placed it at a premium to Domino’s, whose forward PE multiple is 23.9x.

Analysts expect Yum! Brands to report adjusted EPS of $3.84 and $4.24 in 2019 and 2020, respectively. As of yesterday, the company was trading at 30.5 times analysts’ 2019 EPS estimate and 27.6 times their 2020 EPS estimate. The company’s EPS are projected to rise 21% this year, and 10.5% next year.

Domino’s reported a weaker-than-expected second quarter on July 16. Papa John’s is set to report its second-quarter results on August 6.

Management’s guidance

Yum! Brands has maintained its 2019 adjusted EPS guidance at $3.75. The guidance excludes any contribution from this year’s extra week of operation, currency translation, and gains from the company’s investment in Grubhub. Yum! Brands expects its unit growth to rise by 4.0% this year.


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