Oppenheimer Raises Price Target on Yum! Brands (YUM) as Investors Focus on Split

Oppenheimer reiterated an Outperform rating on Yum! Brands (NYSE: YUM), and raised the price target to $88.00 (from $87.00). The late-'16 split is becoming investors' primary focus and still holds attractive upside, in Oppenheimer's view. Also, EPS growth plus dividend yield is targeted in mid-teens, and 95%+ franchise model should get healthy multiple. Oppenheimer recommends owning shares today to take advantage of the SOTP discount into the transaction and of benefits from accelerated cash returns.

Analyst Brian Bittner commented, "YUM remains our top large-cap pick. The late-'16 split is becoming investors' primary focus and still holds attractive upside, in our view. Our SOTP analysis of $88/share is prior to incorporating: 1) a leaner G&A structure at highly franchised New-YUM, 2) impact of upcoming balance sheet recapitalization, or 3) improvements in China profits. All would drive upside to our base-case target. We provide our updated SOTP framework, raise EPS estimates (for recent buyback surge) and analyze cost improvement potential post separation. Reiterate Outperform and raise PT to $88 (from $87)."

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 $80.57 yesterday.

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