UPDATE: Guggenheim Starts Yum! Brands (YUM) at Buy
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Guggenheim analyst Gregory Francfort initiates coverage on Yum! Brands (NYSE: YUM) with a Buy rating and a price target of $135.00.
The analyst comments "YUM Brands is one of the largest restaurant operators in the world with 51K restaurants and over $55bn in annual system sales. The company has four brands KFC, Taco Bell (TB), Pizza Hut (PH), and Habit that represent 54%/23%/22%/1% of system sales and 51%/32%/16%/1% of operating profit, respectively. Pre-Covid, YUM was expanding units at a roughly 4% pace with 2-3% same store sales that were driving a high single digit operating profit growth. China had previously represented ~40% of operating profit when the country was primarily company operated units but YUM refranchised the market in 2016, which cut the profit mix to the low double digits. The three core brands have been putting up high-single-digit to low-double-digit two-year comps in the U.S., supporting a market share gain story. The company has been making investments in technology providers for its franchisees as it looks to flex scale advantages that smaller peers will struggle to mimic. YUM also has a best-in- class global supply chain (YUM China is a great example) that affords it an advantage as international markets embrace U.S. limited-service concepts."
Shares of Yum! Brands closed at $122.79 yesterday.
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