Investing.com -- Baird maintained its Outperform rating on Yum Brands despite reports of a parasite outbreak linked to produce supplied to Taco Bell restaurants that could affect the chain's U.S. comparable sales in the near term.

Several media outlets reported that authorities identified shredded iceberg lettuce supplied to Taco Bell restaurants by Taylor Farms as a potential source of contamination in the parasite outbreak. The outbreak has sickened thousands of people across numerous U.S. states, most notably Michigan. Reports last week indicated that Taco Bell restaurants in Michigan removed certain ingredients as a precautionary measure.

Baird said concerns about Taco Bell food safety could create a measurable headwind to short-term demand trends. The firm referenced the E. Coli outbreak tied to McDonald's U.S. restaurants in October 2024 as a comparable situation, which led to an estimated 500+ basis point slowdown in traffic that began to normalize within three to six months, supported partly by additional marketing investments funded by McDonald's.

The firm's checks suggest Taco Bell U.S. maintained strong comparable sales momentum in the second quarter with comps potentially up 7% to 8% after the first quarter's 8% increase. Baird had modeled second quarter comps at 6%, while consensus stood at 6.8%.

Recent data pointed to a stronger start to the third quarter through last week, with comps tracking ahead of estimates for the third quarter at 5.1% consensus and fourth quarter at 4.9% consensus prior to the food safety news.

If comparable sales decline by approximately 500 basis points from recent levels for the remainder of the year, reported comps could settle to the low-single digits in the second half of 2026. This outcome, combined with expectations for the second quarter, could reduce Baird's 2026 earnings per share estimate by $0.05 to $0.10 from the current $6.88, holding all else equal.

Baird said it views this as a temporary issue and encouraged longer-duration investors to buy Yum shares on any material pullbacks.