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Here's Why Investors Should Hold On to Yum! Brands Stock Now
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Yum! Brands, Inc. (YUM - Free Report) continues to benefit from focus on digitization, delivery services and global expansion. However, the coronavirus pandemic, high debt and the dismal performance at Pizza Hut remain concerns. In the past three months, the company’s shares have gained 6.7%, compared with the industry’s rally of 8.8%.
Factors Likely to Drive Growth
The company’s robust digitalization has been a major growth driver. Further, the company has been focused on making delivery services faster and the results have been positive so far. At the end of second-quarter 2020, the company had more than 34,000 restaurants offering delivery globally, up 13% year over year. The company’s digital sales mix has increased to more than 30% of system sales.
Moreover, Yum! Brands’ partnership with online food delivery platform Grubhub will enhance online sales and delivery from its restaurants. Additionally, the company implemented various digital features in mobile and online platforms across all brand segments to enhance guest experience.
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 first and second quarter of 2020, the company opened 515 and 328 gross new restaurants, respectively. During the second quarter, the company opened restaurants in China, Asia, the United States, Russia and Thailand.
Taco Bell that saw a decline of 8% in same store sales is now witnessing positive trend. At the end of second-quarter, more than 97% of the company’s Taco Bell units were open. Due to closure of dining rooms, company and franchise partners doubled its operations as Taco Bell served an additional 4.8 million cars through our drive-thrus.
Concerns
The coronavirus pandemic affected the company’s operations in second-quarter 2020. Due to the crisis, the company and its franchisees experienced store closures and instances of reduced store-level operations, including lesser operating hours and dining-room closures. Moreover, restaurant traffic has been significantly impacted due to the social-distancing protocols. As a result, worldwide same-store sales declined 15% during the second quarter.
Despite effective innovation across products, marketing and promotions, Pizza Hut sales trend has been choppy in the recent quarter. In first and second-quarter 2020, Pizza Hut same-store sales declined 11% and 9%, respectively. Notably, comps were up 2% in second-quarter 2019. YUM! Brands is focusing on transforming its Pizza Hut business to a modern delivery asset base in the United States. It is also restructuring and upgrading franchisee base. The company believes that the choppy sales trend will persist through 2020.
A strong balance sheet will help a company tide over the ongoing crisis. At the end of Jun 30, 2020, the company’s long-term debt stood at $11.3 billion, compared with $11.1 billion at Mar 31, 2020.
Some better-ranked stocks in the same space include Brinker International, Inc. (EAT - Free Report) , Papa John's International, Inc. (PZZA - Free Report) and Chuy's Holdings, Inc. (CHUY - Free Report) . While Brinker and Papa John's sport a Zacks Rank #1, Chuy's Holdings carries a Zacks Rank #2 (Buy).
Brinker has a trailing four-quarter earnings surprise of 52.7%, on average.
Papa John's has a three-five year earnings per share growth rate of 8%.
Chuy's Holdings’ 2021 earnings are expected to improve 180%.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Image: Bigstock
Here's Why Investors Should Hold On to Yum! Brands Stock Now
Yum! Brands, Inc. (YUM - Free Report) continues to benefit from focus on digitization, delivery services and global expansion. However, the coronavirus pandemic, high debt and the dismal performance at Pizza Hut remain concerns. In the past three months, the company’s shares have gained 6.7%, compared with the industry’s rally of 8.8%.
Factors Likely to Drive Growth
The company’s robust digitalization has been a major growth driver. Further, the company has been focused on making delivery services faster and the results have been positive so far. At the end of second-quarter 2020, the company had more than 34,000 restaurants offering delivery globally, up 13% year over year. The company’s digital sales mix has increased to more than 30% of system sales.
Moreover, Yum! Brands’ partnership with online food delivery platform Grubhub will enhance online sales and delivery from its restaurants. Additionally, the company implemented various digital features in mobile and online platforms across all brand segments to enhance guest experience.
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 first and second quarter of 2020, the company opened 515 and 328 gross new restaurants, respectively. During the second quarter, the company opened restaurants in China, Asia, the United States, Russia and Thailand.
Taco Bell that saw a decline of 8% in same store sales is now witnessing positive trend. At the end of second-quarter, more than 97% of the company’s Taco Bell units were open. Due to closure of dining rooms, company and franchise partners doubled its operations as Taco Bell served an additional 4.8 million cars through our drive-thrus.
Concerns
The coronavirus pandemic affected the company’s operations in second-quarter 2020. Due to the crisis, the company and its franchisees experienced store closures and instances of reduced store-level operations, including lesser operating hours and dining-room closures. Moreover, restaurant traffic has been significantly impacted due to the social-distancing protocols. As a result, worldwide same-store sales declined 15% during the second quarter.
Despite effective innovation across products, marketing and promotions, Pizza Hut sales trend has been choppy in the recent quarter. In first and second-quarter 2020, Pizza Hut same-store sales declined 11% and 9%, respectively. Notably, comps were up 2% in second-quarter 2019. YUM! Brands is focusing on transforming its Pizza Hut business to a modern delivery asset base in the United States. It is also restructuring and upgrading franchisee base. The company believes that the choppy sales trend will persist through 2020.
A strong balance sheet will help a company tide over the ongoing crisis. At the end of Jun 30, 2020, the company’s long-term debt stood at $11.3 billion, compared with $11.1 billion at Mar 31, 2020.
Zacks Rank & Key Picks
Yum! Brands currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same space include Brinker International, Inc. (EAT - Free Report) , Papa John's International, Inc. (PZZA - Free Report) and Chuy's Holdings, Inc. (CHUY - Free Report) . While Brinker and Papa John's sport a Zacks Rank #1, Chuy's Holdings carries a Zacks Rank #2 (Buy).
Brinker has a trailing four-quarter earnings surprise of 52.7%, on average.
Papa John's has a three-five year earnings per share growth rate of 8%.
Chuy's Holdings’ 2021 earnings are expected to improve 180%.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>