Yum! Brands (YUM): Earnings Preview - Wells Fargo

September 30, 2016 8:41 AM EDT
Get Alerts YUM Hot Sheet
Price: $86.97 +0.89%

Rating Summary:
    16 Buy, 11 Hold, 2 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 14 | Down: 11 | New: 8
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Wells Fargo analyst, Jeff Farmer, reiterated his Market Perform rating on shares of Yum! Brands (NYSE: YUM) ahead of the company reporting 3Q16 earnings on 10/5 (AMC). The analyst expects investors to focus on:

1) KFC China’s ability to hold SSS momentum (3Q-to-date SSS were up low-double-digits) and color on SSS through the first few weeks of 4Q16 which began on 9/3

2) PH Casual Dining recovery in China

3) persistence of the 3Q-to-date improvement at Taco Bell (TB) despite the softening industry backdrop (in 2Q14, TB posted its first negative SSS since 1Q14)

On New Yum!, investors remain curious about G&A efficiencies, which based on the analyst's peer analysis, appears to be an area for potential improvement (YUM currently spends about $26,000 per average system store vs. $15,000-$22,000 at highly franchised peers).

The analyst cut 2016E EPS to $3.70 from $3.72 and 2017E to $4.17 from $4.20 to reflect FX pressures.

No change to the $85-$89 valuation range which equates to 12.0-12.5x 2017E EBITDA.

For an analyst ratings summary and ratings history on Yum! Brands click here. For more ratings news on Yum! Brands click here.

Shares of Yum! Brands closed at $89.81 yesterday.

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