We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Investors Should Retain Yum! Brands (YUM) Stock
Read MoreHide Full Article
Yum! Brands, Inc. (YUM - Free Report) is benefiting from robust same-store sales, Taco Bell’s growth and expansion efforts. Shares of the company have gained 7.8% in the past three months, compared with the industry’s increase of 3.9%. However, a rise in net costs and expenses remains a concern.
Growth Drivers
Despite the challenging environment, the company impressed investors with robust same-store sales growth in third-quarter 2022. The company reported consolidated same-store sales (excluding China) growth of 5%. During the quarter, same-store sales at Taco Bell, KFC and Pizza Hut rose 6%, 7% and 1% year over year, respectively.
Yum! Brands is benefiting from a recovery in emerging markets. Given the emphasis on consumer value proposition, expanded digital access and franchise partners, the company anticipates the momentum to continue.
The company is also benefiting from Taco Bell’s strong growth. Taco Bell recorded 98 gross new restaurant openings in third-quarter 2022. The company is focused on building momentum in different markets like the U.K., Spain and India. We expect Taco Bell’s revenues to increase 5.8% in 2022.
This Zacks Rank #3 (Hold) company is also focusing on expanding its footprint. During third-quarter 2022, the company opened 979 gross new units across 74 countries, including nearly 392 gross new units of Pizza Hut and 485 gross new units of KFC. Given the unit economics and a healthy development pipeline, the company anticipates achieving long-term growth of 4-5% in the upcoming periods.
Image Source: Zacks Investment Research
Concerns
Increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs put significant pressure on the company’s margins. A competitive retail environment weighed on the restaurants’ costs. The company is susceptible to profit margin pressure due to relentless expansion. In third-quarter 2022, net costs and expenses amounted to $1,094 million from $1,079 million in the prior-year quarter. Costs associated with brand positioning in all key markets and ongoing investment initiatives are likely to weigh on margins in the near term.
Key Picks
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. (WING - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) .
Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 6.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.
Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have decreased 1.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels.
Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 11.8% in the past year.
The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Here's Why Investors Should Retain Yum! Brands (YUM) Stock
Yum! Brands, Inc. (YUM - Free Report) is benefiting from robust same-store sales, Taco Bell’s growth and expansion efforts. Shares of the company have gained 7.8% in the past three months, compared with the industry’s increase of 3.9%. However, a rise in net costs and expenses remains a concern.
Growth Drivers
Despite the challenging environment, the company impressed investors with robust same-store sales growth in third-quarter 2022. The company reported consolidated same-store sales (excluding China) growth of 5%. During the quarter, same-store sales at Taco Bell, KFC and Pizza Hut rose 6%, 7% and 1% year over year, respectively.
Yum! Brands is benefiting from a recovery in emerging markets. Given the emphasis on consumer value proposition, expanded digital access and franchise partners, the company anticipates the momentum to continue.
The company is also benefiting from Taco Bell’s strong growth. Taco Bell recorded 98 gross new restaurant openings in third-quarter 2022. The company is focused on building momentum in different markets like the U.K., Spain and India. We expect Taco Bell’s revenues to increase 5.8% in 2022.
This Zacks Rank #3 (Hold) company is also focusing on expanding its footprint. During third-quarter 2022, the company opened 979 gross new units across 74 countries, including nearly 392 gross new units of Pizza Hut and 485 gross new units of KFC. Given the unit economics and a healthy development pipeline, the company anticipates achieving long-term growth of 4-5% in the upcoming periods.
Image Source: Zacks Investment Research
Concerns
Increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs put significant pressure on the company’s margins. A competitive retail environment weighed on the restaurants’ costs. The company is susceptible to profit margin pressure due to relentless expansion. In third-quarter 2022, net costs and expenses amounted to $1,094 million from $1,079 million in the prior-year quarter. Costs associated with brand positioning in all key markets and ongoing investment initiatives are likely to weigh on margins in the near term.
Key Picks
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. (WING - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) .
Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 6.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.
Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have decreased 1.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels.
Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 11.8% in the past year.
The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.