Yum! Brands Inc. (Ticker Symbol: YUM) reported second-quarter earnings that were better than analysts were expecting. The Louisville, Kentucky-based fast food giant reported an earnings per share beat of .93 cents per share vs. Wall Street analysts’ estimates of .87 cents per share. Additionally, Yum reported a revenue beat as well, reporting revenue of $1.31 billion vs. Wall Street analysts’ expectations of $1.28 billion. Yum also reported better than expected same-store sales that were up 5% vs. Wall Street analysts’ expectations of 3.01%.
Yum saw its KFC same-store sales grow 6% vs. Wall Street’s expectations of 3.8% growth. The company saw Pizza Hut’s same-store sales grow at 2%, which was higher than the 1.1% increase analysts were looking for. The winner for the quarter was Taco Bell, which had same-store sales growth of 7%, compared to the 3.75% Wall Street was expecting. Taco Bell has consistently been the top performer among Yum’s major fast-food chains and has had increasing same-store sales growth the past for the past 12 quarters. Yum opened over 300 net new stores for the quarter, which was up 7% from the previous quarter.
Yum Brands stock started off 2018 on a weaker note, putting in its first oversold condition in its Relative Strength Index in two years, while trading within a horizontal trading channel. Horizontal Channels are usually viewed as areas of indecisiveness between buyers and sellers where supply and demand were relatively balanced and the price trades within a certain range, and in Yum Brands case, between roughly the $76.00 and $88.00 dollar price levels. The stock finally broke out of that range in the third quarter of 2018. Yum Brand’s stock found price support multiple times in late 2018 and early 2019 at its 200-day moving average before going on a tear rallying at one point over 30% trading to an all-time high of $119.66 on August 1st, 2019. Currently, Yum Brands is just over 1% away from the all-time highs it made earlier this year.
(Chart above courtesy of www.tipranks.com)
Based on a survey of four analysts offering 12-month price targets, the average price target for Yum Brands stock is $117.24. According to that number, the stock is priced at a slight premium relative to Wall Street’s analysts and could be considered overvalued around current levels near $118.86.
Earlier this year, Yum Brands invested $200 million dollars in the online ordering company Grub Hub. The company is going to use the investment to help grow the reach of its delivery network and generate more orders for its KFC and Taco Bell franchises (Pizza Hut already offers delivery). Grub Hub will be the company’s only national partner and will be dedicated to helping grow the KFC and Taco Bell delivery networks.
Investors in the company should look to Yum’s next earnings release on November 3rd for fresh news within the company.