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1. Company Snapshot

1.a. Company Description

YUM! Brands, Inc., together with its subsidiaries, develops, operates, and franchises quick service restaurants worldwide.It operates through four segments: the KFC Division, the Taco Bell Division, the Pizza Hut Division, and the Habit Burger Grill Division.The company operates restaurants under the KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill brands, which specialize in chicken, pizza, made-to-order chargrilled burgers, sandwiches, Mexican-style food categories, and other food products.


As of December 31, 2021, it had 26,934 KFC units; 18,381 Pizza Hut units; 7,791 Taco Bell units; and 318 The Habit Burger Grill units in approximately 157 countries and territories.The company was formerly known as TRICON Global Restaurants, Inc.and changed its name to YUM! Brands, Inc.


in May 2002.YUM! Brands, Inc.was incorporated in 1997 and is headquartered in Louisville, Kentucky.

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1.b. Last Insights on YUM

Yum! Brands' recent performance was driven by strong Q3 earnings, fueled by global expansion, digital strength, and new menu innovations across its leading brands. The company's quarterly earnings of $1.58 per share beat the Zacks Consensus Estimate of $1.47 per share. Robust performance from KFC and Taco Bell offset inflationary pressures, supporting stable revenue growth. A potential Pizza Hut divestiture could further strengthen margins and liquidity. The company's solid cash flow and prudent debt management also contributed to its positive performance.

1.c. Company Highlights

2. Yum! Brands' Strong Q3 Performance Driven by KFC and Taco Bell

Yum! Brands reported a strong financial performance in the third quarter, with system sales up 5% and core operating profit up 7%. Earnings per share (EPS) came in at $1.58, beating the estimated $1.49. The company's revenue growth was driven by the strong performance of its KFC and Taco on 6% unit growth and 3% same-store sales growth, while Taco Bell's same-store sales grew 7%. The company's restaurant-level margins also improved, with Taco Bell U.S. delivering 23.9% margins, 50 basis points higher year-over-year, and KFC delivering 13.7% restaurant-level margins, 120 basis points higher year-over-year.

Publication Date: Nov -05

📋 Highlights
  • Strong Q3 Financial Performance:: System sales increased 5% YoY, core operating profit rose 7%, with KFC contributing 14% core profit growth driven by 6% unit growth.
  • Taco Bell Momentum:: U.S. same-store sales grew 7% due to innovation and digital engagement, while 74 new units opened globally, including 27 in international markets.
  • Global Unit Expansion:: 1,131 gross new units opened in Q3, a record, with KFC accounting for 760 units and Taco Bell adding 74 units, up 30% YoY.
  • Strategic Financial Moves:: Completed $1.5B Taco Bell senior secured notes issuance in September, used to repay debt and prefund $670M acquisition of 128 U.S. Taco Bell stores.
  • Technology & AI Focus:: Launched Byte Coach (AI-driven performance tool), 1/3 of developers now use AI tools, aiming for 100% usage by 2026 to enhance operational efficiency.

Segment Performance

KFC delivered 14% core operating profit growth, driven by a focus on brand relevance and a different approach to social marketing, with early signs of a turnaround in the US market. Taco Bell's momentum continued, driven by its ability to provide craveable food, a convenient and easy experience, and unbeatable value, resulting in a 7% same-store sales growth. The company's development pipeline remains robust, with 1,131 gross new units opened globally, a Q3 record.

valuation and growth prospects

With a P/E Ratio of 29.76 and an expected revenue growth rate of 6.5% next year, the market is pricing in a certain level of growth for Yum! Brands. The company's EV/EBITDA ratio is 20.08, and its ROIC is 31.62%, indicating a strong ability to generate returns on invested capital. The company's net leverage ratio is expected to end the year at approximately 4x, and its digital sales are growing quickly, with a digital mix of approximately 60%.

Strategic Review and Future Plans

Yum! Brands is exploring strategic options for the Pizza Hut brand, with the objective of maximizing value for the company and positioning Pizza Hut and its franchise partners for greater success. The company is confident in the strength of its strategies, the agility of its franchisees, and the power of its business model to drive sustainable growth over the long term. The acquisition of 128 Taco Bell U.S. stores in the fourth quarter is expected to help unlock unit development in the region.

3. NewsRoom

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Fisher Asset Management LLC Acquires 8,083 Shares of Yum! Brands, Inc. $YUM

Dec -04

Source: defenseworld.net

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Pizza Hut Doubles Down on Helping Fans Holiday Harder with New Limited-Edition Tipsy Elves Triple Treat Box Onesie

Dec -03

Source: prnewswire.com

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Market Today: Deal Talks, Retail Wins, AI Chips, and Crypto Volatility

Dec -02

Source: gurufocus.com

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First Look: Versace deal, crypto slump, WBD bids and Airbus woes

Dec -02

Source: gurufocus.com

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Retailers Hype—and Hope for—a Busy Black Friday This Year

Nov -26

Source: investopedia.com

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Jack Ma Was Rejected By KFC, Police, And Harvard — Now His Alibaba Fortune Surpasses The Entire Value Of The Fried Chicken Giant

Nov -25

Source: feeds.benzinga.com

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AXQ Capital LP Purchases Shares of 7,335 Yum! Brands, Inc. $YUM

Nov -22

Source: defenseworld.net

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Contrasting Yum! Brands (NYSE:YUM) and Starbucks (NASDAQ:SBUX)

Nov -21

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.93%)

6. Segments

KFC Division

Expected Growth: 6.5%

KFC Division's 6.5% growth driven by digital transformation, expanding delivery and takeout services, menu innovation, and strategic marketing efforts. Additionally, investments in sustainability and customer experience enhancements have contributed to the segment's growth, attracting and retaining customers in a competitive fast-food market.

Taco Bell Division

Expected Growth: 7.5%

Taco Bell's 7.5% growth driven by menu innovation, aggressive expansion in international markets, and digital transformation through mobile ordering and delivery. Increased demand for affordable, convenient food options and successful marketing campaigns have also contributed to the division's growth within Yum! Brands, Inc.

Pizza Hut Division

Expected Growth: 6.0%

Pizza Hut's 6.0% growth driven by digital transformation, menu innovation, and delivery expansion. Increased online ordering, strategic partnerships, and revamped marketing efforts have boosted sales. Additionally, menu revamps and promotions have attracted new customers, contributing to the division's growth within Yum! Brands, Inc.

Habit Burger & Grill Division

Expected Growth: 8.0%

Habit Burger & Grill's 8.0% growth driven by menu innovation, aggressive expansion, and strong marketing efforts. Increased demand for fast-casual burgers and Habit's unique chargrilled offerings have fueled same-store sales growth, while Yum!'s resources and expertise have enabled accelerated unit growth and operational efficiencies.

Unallocated Franchise and Property

Expected Growth: 5.5%

Unallocated Franchise and Property growth of 5.5% for Yum! Brands, Inc. is driven by system-wide sales growth across KFC, Pizza Hut, and Taco Bell, increased franchise fees, and royalties. Additionally, strategic investments in digital transformation, marketing initiatives, and menu innovation contribute to the segment's growth.

7. Detailed Products

KFC (Kentucky Fried Chicken)

KFC is a fast-food restaurant chain that specializes in fried chicken and other chicken-based meals. The menu includes Original Recipe chicken, chicken sandwiches, chicken wings, and sides like mashed potatoes and coleslaw.

Pizza Hut

Pizza Hut is a fast-food restaurant chain that specializes in pizza and other Italian-American cuisine. The menu includes pizzas, pasta, wings, and sides like breadsticks and salads.

Taco Bell

Taco Bell is a fast-food restaurant chain that specializes in Mexican-inspired food. The menu includes tacos, burritos, quesadillas, and other items like nachos and value meals.

8. Yum! Brands, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Yum! Brands, Inc. faces a moderate threat from substitutes as consumers have various dining options, including fast-casual restaurants, full-service restaurants, and home-cooked meals. However, the company's diverse portfolio of brands, including KFC, Pizza Hut, and Taco Bell, allows it to cater to different tastes and preferences, mitigating the threat.

Bargaining Power Of Customers

Customers have limited bargaining power due to the low switching costs and the presence of multiple fast-food options. Additionally, Yum! Brands' loyalty programs and marketing efforts help to retain customers and reduce their bargaining power.

Bargaining Power Of Suppliers

Yum! Brands, Inc. has a large and diverse supplier base, which reduces the bargaining power of individual suppliers. The company's scale and market presence also enable it to negotiate favorable prices and terms with suppliers.

Threat Of New Entrants

The threat of new entrants is moderate due to the relatively low barriers to entry in the fast-food industry. However, Yum! Brands' established brands, extensive distribution network, and significant marketing budget create significant obstacles for new entrants.

Intensity Of Rivalry

The fast-food industry is highly competitive, with many established players, including McDonald's, Burger King, and Subway. Yum! Brands, Inc. faces intense rivalry from these competitors, which invest heavily in marketing, menu innovation, and promotions to attract customers.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 264.90%
Debt Cost 5.09%
Equity Weight -164.90%
Equity Cost 8.16%
WACC 0.02%
Leverage -160.64%

11. Quality Control: Yum! Brands, Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Booking

A-Score: 6.3/10

Value: 3.8

Growth: 8.7

Quality: 8.0

Yield: 1.0

Momentum: 7.5

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Yum!

A-Score: 5.9/10

Value: 4.0

Growth: 4.8

Quality: 6.4

Yield: 4.0

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

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Stock-Card
PulteGroup

A-Score: 5.8/10

Value: 5.9

Growth: 8.8

Quality: 7.6

Yield: 2.0

Momentum: 4.0

Volatility: 6.3

1-Year Total Return ->

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Stock-Card
McDonald's

A-Score: 5.5/10

Value: 3.6

Growth: 4.8

Quality: 6.5

Yield: 4.0

Momentum: 4.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Starbucks

A-Score: 4.8/10

Value: 3.6

Growth: 5.6

Quality: 4.3

Yield: 5.0

Momentum: 3.0

Volatility: 7.3

1-Year Total Return ->

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Stock-Card
Chipotle Mexican Grill

A-Score: 3.9/10

Value: 2.2

Growth: 8.4

Quality: 5.7

Yield: 0.0

Momentum: 1.0

Volatility: 6.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

144.96$

Current Price

144.96$

Potential

0.00%

Expected Cash-Flows