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.
Yum! Brands' (YUM) Rides on Strategic Efforts, Risks Stay
Read MoreHide Full Article
Yum! Brands, Inc. (YUM - Free Report) remains on track to achieve its target announced under the three-year strategic transformation plan, following the separation of the company’s China division.
Notably, the company’s transformation and growth strategy involves greater focus on the development of its three iconic global brands — KFC, Pizza Hut and Taco Bell, increasing its franchise ownership and creating a leaner, more efficient cost structure. Additionally, this restaurant operator is working on development of bold restaurants and unrivaled culture and talent to drive continued growth.
Currently, Yum! Brands owns, operates and franchises over 44,000 restaurants in more than 135 countries and territories. In fact, its brands — KFC, Pizza Hut and Taco Bell — are regarded as the global leaders of the chicken, pizza and Mexican-style food categories.
Details of the Growth Plan
Yum! Brands is trying hard to drive growth at its three iconic brands and thereby improve the key drivers of its business, comps and net new units.
While the Pizza Hut brand’s international division has been largely doing well, Yum! Brands is working on a number of areas to get its fair share of growth in the U.S. market where results have been predominantly soft. To this end, the company entered into an agreement with the Pizza Hut U.S. franchisees and plans to invest roughly $130 million on improving brand marketing alignment as well as accelerate enhancements to operations and technology. This, in turn, is anticipated to increase convenience for customers leading to solid results in 2018 and beyond.
Yum! Brands is particularly committed to offer a hot, fast and reliable Pizza Hut experience over the long term. In fact, furthering its delivery-centric strategy, the brand stated that it expects to hire 14,000 new delivery drivers by the end of 2017. Of late, the brand also announced the launch of — Hut Rewards — its national loyalty program.
In the United States, Yum! Brands’ KFC division’s revamping of the restaurants, focus on its operational excellence and providing increased continence to customers is driving comps growth. At KFC International, management is aggressively pursuing its global delivery initiative, given the fact that the service is the fastest growing channel in the business and KFC product is ideal for the same. In fact, management believes that the brand has significant room for growth in both developed and emerging markets.
Management seeks to continue developing the Taco Bell brand through continued focus on innovation and value, expanding its delivery program, inventive marketing strategies and extended line of breakfast offerings. Also, Yum! Brands’ continues to unlock the business model by driving cost out of the supply chain and building scale with new and existing franchises to make the brand sustainable internationally over the long term.
The company’s digital efforts has increased manifold with all its three bands’ deploying technology to enhance guest experience. In the meantime, Yum! Brands’ seem to continue its transformation process toward a single point-of-sale system in the United States by 2017-end.
Of late, Yum! Brands along with various companies in the restaurant space like Restaurant Brands International Inc. (QSR - Free Report) , McDonald's Corp. (MCD - Free Report) , Domino's Pizza, Inc. (DPZ - Free Report) and others have adopted a de-risking strategy by reducing their ownership of restaurants through refranchising.
Additionally, the company is committed toward becoming at least 98% franchised and thus expects to become a pure play franchisor with more stable earnings, higher profit margins, lower capital requirements and stronger cash flow conversion.
Also, this restaurant operator is striving to revamp its financial profile and thereby improve the efficiency of its organization and cost structure, globally. To this end, management anticipates to cut capital expenditures to about $100 million by 2019, increase free cash flow conversion to 100% and also reduce General and Administrative (G&A) expenditure by approximately $300 million (or 1.7% of system sales). Over the next three years, the company is committed to return an additional $6.5 billion to $7 billion to shareholders through share repurchases and dividends. Resultantly, Yum! Brands’ expects EPS of at least $3.75 in 2019, which is first clean year post-transformation.
Notably, Yum! Brands’ efforts have started to reap benefits as reflected by positive stock price movement. Evidently, post-separation, shares of the company have gained 30.6%, outperforming the 20% growth of the industry it belongs to. Moreover, earnings estimates for current year moved up slightly over the past 60 days, reflecting ongoing optimism in the stock. The bullish trend in price is thus anticipated to continue in the quarters ahead.
Concerns
Yum! Brands is highly exposed to various emerging nations in Latin America. In fact, these nations have been exhibiting decelerating growth for some time due to various macro headwinds, which might dent sales in the near term.
Foreign exchange translation is also a concern for the company, given its significant international presence.
In addition, the third quarter of 2017 marked the seventh-consecutive quarter of negative comp sales for the restaurant industry as a whole, thereby stretching the somber mood. Thus, a continued choppy sales environment in the domestic space is likely to keep the top line under pressure.
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Yum! Brands' (YUM) Rides on Strategic Efforts, Risks Stay
Yum! Brands, Inc. (YUM - Free Report) remains on track to achieve its target announced under the three-year strategic transformation plan, following the separation of the company’s China division.
Notably, the company’s transformation and growth strategy involves greater focus on the development of its three iconic global brands — KFC, Pizza Hut and Taco Bell, increasing its franchise ownership and creating a leaner, more efficient cost structure. Additionally, this restaurant operator is working on development of bold restaurants and unrivaled culture and talent to drive continued growth.
Currently, Yum! Brands owns, operates and franchises over 44,000 restaurants in more than 135 countries and territories. In fact, its brands — KFC, Pizza Hut and Taco Bell — are regarded as the global leaders of the chicken, pizza and Mexican-style food categories.
Details of the Growth Plan
Yum! Brands is trying hard to drive growth at its three iconic brands and thereby improve the key drivers of its business, comps and net new units.
While the Pizza Hut brand’s international division has been largely doing well, Yum! Brands is working on a number of areas to get its fair share of growth in the U.S. market where results have been predominantly soft. To this end, the company entered into an agreement with the Pizza Hut U.S. franchisees and plans to invest roughly $130 million on improving brand marketing alignment as well as accelerate enhancements to operations and technology. This, in turn, is anticipated to increase convenience for customers leading to solid results in 2018 and beyond.
Yum! Brands is particularly committed to offer a hot, fast and reliable Pizza Hut experience over the long term. In fact, furthering its delivery-centric strategy, the brand stated that it expects to hire 14,000 new delivery drivers by the end of 2017. Of late, the brand also announced the launch of — Hut Rewards — its national loyalty program.
In the United States, Yum! Brands’ KFC division’s revamping of the restaurants, focus on its operational excellence and providing increased continence to customers is driving comps growth. At KFC International, management is aggressively pursuing its global delivery initiative, given the fact that the service is the fastest growing channel in the business and KFC product is ideal for the same. In fact, management believes that the brand has significant room for growth in both developed and emerging markets.
Management seeks to continue developing the Taco Bell brand through continued focus on innovation and value, expanding its delivery program, inventive marketing strategies and extended line of breakfast offerings. Also, Yum! Brands’ continues to unlock the business model by driving cost out of the supply chain and building scale with new and existing franchises to make the brand sustainable internationally over the long term.
The company’s digital efforts has increased manifold with all its three bands’ deploying technology to enhance guest experience. In the meantime, Yum! Brands’ seem to continue its transformation process toward a single point-of-sale system in the United States by 2017-end.
Of late, Yum! Brands along with various companies in the restaurant space like Restaurant Brands International Inc. (QSR - Free Report) , McDonald's Corp. (MCD - Free Report) , Domino's Pizza, Inc. (DPZ - Free Report) and others have adopted a de-risking strategy by reducing their ownership of restaurants through refranchising.
Additionally, the company is committed toward becoming at least 98% franchised and thus expects to become a pure play franchisor with more stable earnings, higher profit margins, lower capital requirements and stronger cash flow conversion.
Also, this restaurant operator is striving to revamp its financial profile and thereby improve the efficiency of its organization and cost structure, globally. To this end, management anticipates to cut capital expenditures to about $100 million by 2019, increase free cash flow conversion to 100% and also reduce General and Administrative (G&A) expenditure by approximately $300 million (or 1.7% of system sales). Over the next three years, the company is committed to return an additional $6.5 billion to $7 billion to shareholders through share repurchases and dividends. Resultantly, Yum! Brands’ expects EPS of at least $3.75 in 2019, which is first clean year post-transformation.
Notably, Yum! Brands’ efforts have started to reap benefits as reflected by positive stock price movement. Evidently, post-separation, shares of the company have gained 30.6%, outperforming the 20% growth of the industry it belongs to. Moreover, earnings estimates for current year moved up slightly over the past 60 days, reflecting ongoing optimism in the stock. The bullish trend in price is thus anticipated to continue in the quarters ahead.
Concerns
Yum! Brands is highly exposed to various emerging nations in Latin America. In fact, these nations have been exhibiting decelerating growth for some time due to various macro headwinds, which might dent sales in the near term.
Foreign exchange translation is also a concern for the company, given its significant international presence.
In addition, the third quarter of 2017 marked the seventh-consecutive quarter of negative comp sales for the restaurant industry as a whole, thereby stretching the somber mood. Thus, a continued choppy sales environment in the domestic space is likely to keep the top line under pressure.
Yum! Brands carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>