Yum! Brands (YUM): Reiterating Top Pick and Raising PT - RBC

RBC Capital analyst, David Palmer, reiterated his Outperform rating on shares of Yum! Brands (NYSE: Yum) and highlighted the company as his top pick due to the significant amount cash that will be returned to shareholders in the next two years as well as the upcoming separation of Yum China. He estimates that We estimate that the new Yum! Brands will be 97%+ franchised, and can consistently deliver 6%+ revenue and 15% total return over the long-term.

2016 and 2017 EPS estimates increase from $3.60 and $4.06 to $3.67 (+16% YOY) and $4.17 (+14% YOY) based on accelerating sales growth and margin recapture in China (vs. at least 17% restaurant margin this year) as well as stable to improving momentum in the branded segments. In addition, the price target increases from $94 to $97 based on a SOTP analysis, which yields a $63 value from the New Yum and a $34 value for Yum China. Although YOY comparisons in China become more difficult, the brands are in a much healthier position then they had been in some time.

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 $88.27 yesterday.

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