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Yum! Brands (YUM) to Acquire Dragontail Systems for A$93.5M

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In a bid to boost its delivery capabilities as well as to integrate new technological solutions, Yum! Brands, Inc. (YUM - Free Report) entered into a binding agreement to acquire the Australia-based technology solutions provider — Dragontail Systems Limited. Quoted at A$93.5 million, the transaction will be conducted through a share scheme arrangement in accordance with the Australian corporate law. The deal, which is likely to be sealed by the end of third-quarter 2021, will be the company’s third technology acquisition in 2021.

Dragontail’s artificial intelligence (AI)-based platform focuses on kitchen order management and delivery technology. It automates kitchen flow combined with the process of dispatching drivers. Also, it offers features such as order tracking. This acquisition will have an immaterial impact on Yum! Brands’ 2021 financial results.

In this regard, Chris Turner, chief financial officer, Yum! Brands, stated, “With Dragontail, we expect to tap into the power of AI to accelerate and further enhance our delivery technology capabilities, especially at Pizza Hut, and optimize the end-to-end food preparation process.”

Currently, the platform has been deployed across 1,500 Pizza Hut restaurants (in more than 10 countries). Nonetheless, with the successful implementation of the scheme the company intends to boost the platform across its brands globally.

Focus On Technological Driven Buyouts

Yum! Brands has been focusing on technological driven acquisitions to boost sales.

In March 2021, the company acquired Kvantum, Inc. — an AI-based consumer insights and marketing performance analytics company. The buyout focused on the combination of machine learning and econometric modeling into the company’s marketing performance analytics platform to drive calendar and marketing spend optimization.

During the same period, the company acquired Tictuk Technologies, a leading omnichannel ordering and marketing platform company. Notably, the buyout boosted ways for consumer access and order primarily through text, social media and other conversational channels. Going forward, this advanced point-of-sale system is likely to boost member experience through optimization features, accuracy, speed and reliability.

Price Performance

Coming to price performance, shares of Yum! Brands’ have moved up 11% so far this year compared with the industry's 8.9% growth. Notably, the company is benefitting from continuous focus on off-premise channels, strategic investments in digital technology and refranchising efforts. Moreover, the company implemented various digital features in mobile and online platforms across all brand segments to enhance guest experience. Nonetheless, earnings estimates for 2021 have moved up 4.8% in the past 30 days, depicting analysts’ optimism regarding the stock’s growth potential.

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.

Some other top-ranked stocks in the same space include Chuy's Holdings, Inc. (CHUY - Free Report) and Dine Brands Global, Inc. (DIN - Free Report) and Texas Roadhouse, Inc. (TXRH - Free Report) , each sporting a Zacks Rank #1.

Chuy's Holdings has a trailing four-quarter earnings surprise of 127.6%, on average.

Dine Brands 2021 earnings are expected to surge 268.7%.

Texas Roadhouse has a three-five year earnings per share growth rate of 10%.

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