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Yum! Brands (YUM) Outperforms Industry Past Year: Here's Why
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Yum! Brands, Inc. (YUM - Free Report) is poised to benefit from its digital initiatives and strong same-store sales growth. Also, robust Taco Bell performance and unit expansion efforts bode well.
In the past year, shares of Yum! Brands have gained 10.8% compared with the industry’s 6% growth. An upward revision in earnings estimates for 2023 reflects analysts’ optimism regarding the company’s growth potential. In the past 60 days, the Zacks Consensus Estimate for 2023 earnings has increased 0.39% to $5.19 per share.
Factors Driving Growth
Image Source: Zacks Investment Research
Focus on Digital Initiatives: YUM! Brands have been actively pursuing its transformation process toward a single point-of-sale system in the United States. The company updated its mobile app and Hut Rewards to enhance customer experience. It has also introduced various digital features in mobile and online platforms across all brand segments, enhancing the guest experience. The company's efforts to boost delivery services have yielded positive outcomes. In second-quarter 2023, YUM reported digital sales of around $7 billion, reflecting the success of these initiatives.
Additionally, it has implemented Dragontail Systems, leveraging AI to streamline food preparation and enhance delivery capabilities. The company expanded Its global platform adoption to 28 markets across both KFC and Pizza Hut brands. The company plans to integrate this system into 7,000 international stores by 2023.
Strong Same-Store Sales Growth: The company stands to gain from solid comps growth. In the second quarter of 2023, YUM impressed investors with a robust 9% year-over-year growth in consolidated same-store sales. Higher dine-in traffic, digital efforts and strategic partnerships drove the increase. Taco Bell, KFC, and Pizza Hut witnessed 4%, 13%, and 4% year over year growth in same-store sales, respectively. The company has been benefiting from a recovery in emerging markets. The company's focus on consumer value, digital expansion, and franchise collaborations is expected to maintain this positive momentum.
Robust Taco Bell Performance: Increased focus on Taco Bell bodes well. During second-quarter 2023, Taco Bell's revenues increased 6% year over year to $621 million. The upside was primarily backed by same-store sales growth (of 4%) and unit growth (5%). Also, the emphasis on commercial strategies, including building brand buzz, mass occasions and digital initiatives, bode well.
During the quarter, Taco Bell's International system sales grew 18% year over year courtesy of continued development momentum and strong value propositions (through menu innovation offerings). The company opened 63 gross new units during the quarter, including 27 in international markets. The company emphasized enhancing its digital initiatives to drive customer engagement and digital sales in the upcoming periods.
Unit Expansion to Drive Growth: The company's strategy emphasizes continuous unit expansion to boost sales incrementally. During second-quarter 2023, the company opened 1,025 stores, resulting in 6% unit growth on a year-over-year basis. The company also reported positive feedback from its franchise partners, envisioning broad consumer appeal and a vast untapped market opportunity. Considering its existing footprint of 55,361 restaurants worldwide, YUM! Brands believes it can roughly triple its global presence over the long term.
Zacks Rank & Other Key Picks
Yum! Brands currently sports a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the Zacks Retail-Wholesale sector are:
Abercrombie & Fitch Co. (ANF - Free Report) flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 724.8%, on average. Shares of ANF have surged 256.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s 2024 sales and earnings per share (EPS) implies increases of 10% and 1,644%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) currently carries a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 35%, on average. The stock has gained 19.6% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests a rise of 19.2% and 13%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) sports a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 58.6%, on average. Shares of SHAK have gained 18.2% in the past year.
The Zacks Consensus Estimate for SHAK’s 2023 sales and EPS indicates a 20.4% and a 174.2% growth, respectively, from the year-ago period’s levels.
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Yum! Brands (YUM) Outperforms Industry Past Year: Here's Why
Yum! Brands, Inc. (YUM - Free Report) is poised to benefit from its digital initiatives and strong same-store sales growth. Also, robust Taco Bell performance and unit expansion efforts bode well.
In the past year, shares of Yum! Brands have gained 10.8% compared with the industry’s 6% growth. An upward revision in earnings estimates for 2023 reflects analysts’ optimism regarding the company’s growth potential. In the past 60 days, the Zacks Consensus Estimate for 2023 earnings has increased 0.39% to $5.19 per share.
Factors Driving Growth
Image Source: Zacks Investment Research
Focus on Digital Initiatives: YUM! Brands have been actively pursuing its transformation process toward a single point-of-sale system in the United States. The company updated its mobile app and Hut Rewards to enhance customer experience. It has also introduced various digital features in mobile and online platforms across all brand segments, enhancing the guest experience. The company's efforts to boost delivery services have yielded positive outcomes. In second-quarter 2023, YUM reported digital sales of around $7 billion, reflecting the success of these initiatives.
Additionally, it has implemented Dragontail Systems, leveraging AI to streamline food preparation and enhance delivery capabilities. The company expanded Its global platform adoption to 28 markets across both KFC and Pizza Hut brands. The company plans to integrate this system into 7,000 international stores by 2023.
Strong Same-Store Sales Growth: The company stands to gain from solid comps growth. In the second quarter of 2023, YUM impressed investors with a robust 9% year-over-year growth in consolidated same-store sales. Higher dine-in traffic, digital efforts and strategic partnerships drove the increase. Taco Bell, KFC, and Pizza Hut witnessed 4%, 13%, and 4% year over year growth in same-store sales, respectively. The company has been benefiting from a recovery in emerging markets. The company's focus on consumer value, digital expansion, and franchise collaborations is expected to maintain this positive momentum.
Robust Taco Bell Performance: Increased focus on Taco Bell bodes well. During second-quarter 2023, Taco Bell's revenues increased 6% year over year to $621 million. The upside was primarily backed by same-store sales growth (of 4%) and unit growth (5%). Also, the emphasis on commercial strategies, including building brand buzz, mass occasions and digital initiatives, bode well.
During the quarter, Taco Bell's International system sales grew 18% year over year courtesy of continued development momentum and strong value propositions (through menu innovation offerings). The company opened 63 gross new units during the quarter, including 27 in international markets. The company emphasized enhancing its digital initiatives to drive customer engagement and digital sales in the upcoming periods.
Unit Expansion to Drive Growth: The company's strategy emphasizes continuous unit expansion to boost sales incrementally. During second-quarter 2023, the company opened 1,025 stores, resulting in 6% unit growth on a year-over-year basis. The company also reported positive feedback from its franchise partners, envisioning broad consumer appeal and a vast untapped market opportunity. Considering its existing footprint of 55,361 restaurants worldwide, YUM! Brands believes it can roughly triple its global presence over the long term.
Zacks Rank & Other Key Picks
Yum! Brands currently sports a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the Zacks Retail-Wholesale sector are:
Abercrombie & Fitch Co. (ANF - Free Report) flaunts a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 724.8%, on average. Shares of ANF have surged 256.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for ANF’s 2024 sales and earnings per share (EPS) implies increases of 10% and 1,644%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) currently carries a Zacks Rank #1. It has a trailing four-quarter earnings surprise of 35%, on average. The stock has gained 19.6% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests a rise of 19.2% and 13%, respectively, from the year-ago period’s levels.
Shake Shack Inc. (SHAK - Free Report) sports a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 58.6%, on average. Shares of SHAK have gained 18.2% in the past year.
The Zacks Consensus Estimate for SHAK’s 2023 sales and EPS indicates a 20.4% and a 174.2% growth, respectively, from the year-ago period’s levels.