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Taco Bell & Habit Burger to Aid Yum! Brands (YUM), Costs Ail
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Yum! Brands, Inc. (YUM - Free Report) is benefiting from the robust performance of Taco Bell, Habit Burger, KFC and Pizza Hut segments. Though all four segments are witnessing robust growth, Taco Bell and Habit Burger are likely to be the major growth drivers in 2023.
The company is benefiting from robust digital initiatives through mobile and online platforms across all brand segments and same-store sales growth. Also, its focus on unit-expansion efforts bodes well. In the past three months, the stock has gained 9.7% compared with the industry’s growth of 10.2%.
Our model predicts, YUM’s revenues and earnings in 2023 to witness growth of 6.4% and 8.1%, respectively, year over year.
Let’s delve deeper.
Growth Drivers
Our model predicts, the Taco Bell segment’s revenues in 2023 to grow 6.7% year over year. During first-quarter 2023, segmental revenues were $572 million, up 11% from the year-ago quarter's levels. The upside was primarily backed by same-store sales growth (12%) and unit growth (6%).
The Taco Bell segment is benefiting from solid demand with respect to craveable product offerings including Crispy Melt Taco and Grilled Cheese Burrito. It also initiated delivery service through its mobile app boosting customer access to craveable products.
Per our model, Habit Burger’s 2023 revenues are likely to rise 13.8% year over year. The segment is benefiting from expansion efforts. In first-quarter 2023, Habit Burger opened 11 gross new restaurants in the United States and Cambodia.
The Zacks Rank #3 (Hold) company aims to revamp its financial profile. This, in turn, will improve the efficiency of its organization and cost structure globally. It believes that a “slimmer Yum Brands” would lead to efficiency gains.
Considering its existing footprint of 55,361 restaurants worldwide, YUM! Brands believes that it can roughly triple its current global presence over the long term. Its efforts to consolidate franchisees in Latin America and the Caribbean are likely to drive growth. During the first quarter of 2023, YUM opened 746 gross new units, including nearly 271 gross new units of Pizza Hut and 385 gross new units of KFC.
Despite the challenging environment, the company impressed investors with robust same-store sales growth in first-quarter 2023. It reported consolidated same-store sales (excluding China) growth of 8% year over year. A rise in dine-in traffic, digital initiatives and strategic third-party partnerships resulted in the upside. During the quarter, same-store sales at Taco Bell, KFC and Pizza Hut rose 8%, 9% and 7% year over year, respectively.
The company has been benefiting from a recovery in emerging markets. Given the emphasis on consumer value proposition, expanded digital access and franchise partners, YUM anticipates the momentum to continue in the upcoming periods.
Image Source: Zacks Investment Research
Concerns
An increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs put significant pressure on Yum! Brands’ margins. A competitive retail environment weighed on the restaurants’ costs. It is susceptible to profit margin pressure due to relentless expansion.
In first-quarter 2023, net costs and expenses amounted to $1,122 million compared with $1,038 million reported in the prior-year quarter. The transfer of business and exit from Russia incorporated certain additional costs which hurt margins. 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
Here we present some better-ranked stocks from the Zacks Retail and Wholesale sector.
The Zacks Consensus Estimate for MELI’s 2023 sales and EPS indicates rises of 27.6% and 75%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) flaunts a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 480.6%, on average. Shares of ANF have increased 91.1% in the past year.
The Zacks Consensus Estimate for ANF’s 2023 sales and EPS indicates growth of 3.4% and 660%, respectively, from the year-ago period’s levels.
Chipotle Mexican Grill, Inc. (CMG - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 4.7%, on average. Shares of CMG have increased 64.7% in the past year.
The Zacks Consensus Estimate for CMG’s 2023 sales and EPS indicates gains 14% and 34%, respectively, from the year-ago period’s levels.
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Taco Bell & Habit Burger to Aid Yum! Brands (YUM), Costs Ail
Yum! Brands, Inc. (YUM - Free Report) is benefiting from the robust performance of Taco Bell, Habit Burger, KFC and Pizza Hut segments. Though all four segments are witnessing robust growth, Taco Bell and Habit Burger are likely to be the major growth drivers in 2023.
The company is benefiting from robust digital initiatives through mobile and online platforms across all brand segments and same-store sales growth. Also, its focus on unit-expansion efforts bodes well. In the past three months, the stock has gained 9.7% compared with the industry’s growth of 10.2%.
Our model predicts, YUM’s revenues and earnings in 2023 to witness growth of 6.4% and 8.1%, respectively, year over year.
Let’s delve deeper.
Growth Drivers
Our model predicts, the Taco Bell segment’s revenues in 2023 to grow 6.7% year over year. During first-quarter 2023, segmental revenues were $572 million, up 11% from the year-ago quarter's levels. The upside was primarily backed by same-store sales growth (12%) and unit growth (6%).
The Taco Bell segment is benefiting from solid demand with respect to craveable product offerings including Crispy Melt Taco and Grilled Cheese Burrito. It also initiated delivery service through its mobile app boosting customer access to craveable products.
Per our model, Habit Burger’s 2023 revenues are likely to rise 13.8% year over year. The segment is benefiting from expansion efforts. In first-quarter 2023, Habit Burger opened 11 gross new restaurants in the United States and Cambodia.
The Zacks Rank #3 (Hold) company aims to revamp its financial profile. This, in turn, will improve the efficiency of its organization and cost structure globally. It believes that a “slimmer Yum Brands” would lead to efficiency gains.
Considering its existing footprint of 55,361 restaurants worldwide, YUM! Brands believes that it can roughly triple its current global presence over the long term. Its efforts to consolidate franchisees in Latin America and the Caribbean are likely to drive growth. During the first quarter of 2023, YUM opened 746 gross new units, including nearly 271 gross new units of Pizza Hut and 385 gross new units of KFC.
Despite the challenging environment, the company impressed investors with robust same-store sales growth in first-quarter 2023. It reported consolidated same-store sales (excluding China) growth of 8% year over year. A rise in dine-in traffic, digital initiatives and strategic third-party partnerships resulted in the upside. During the quarter, same-store sales at Taco Bell, KFC and Pizza Hut rose 8%, 9% and 7% year over year, respectively.
The company has been benefiting from a recovery in emerging markets. Given the emphasis on consumer value proposition, expanded digital access and franchise partners, YUM anticipates the momentum to continue in the upcoming periods.
Image Source: Zacks Investment Research
Concerns
An increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs put significant pressure on Yum! Brands’ margins. A competitive retail environment weighed on the restaurants’ costs. It is susceptible to profit margin pressure due to relentless expansion.
In first-quarter 2023, net costs and expenses amounted to $1,122 million compared with $1,038 million reported in the prior-year quarter. The transfer of business and exit from Russia incorporated certain additional costs which hurt margins. 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
Here we present some better-ranked stocks from the Zacks Retail and Wholesale sector.
MercadoLibre, Inc. (MELI - Free Report) sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 35%, on average. Shares of MELI have gained 92.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MELI’s 2023 sales and EPS indicates rises of 27.6% and 75%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) flaunts a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 480.6%, on average. Shares of ANF have increased 91.1% in the past year.
The Zacks Consensus Estimate for ANF’s 2023 sales and EPS indicates growth of 3.4% and 660%, respectively, from the year-ago period’s levels.
Chipotle Mexican Grill, Inc. (CMG - Free Report) sports a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 4.7%, on average. Shares of CMG have increased 64.7% in the past year.
The Zacks Consensus Estimate for CMG’s 2023 sales and EPS indicates gains 14% and 34%, respectively, from the year-ago period’s levels.