On Wednesday, Loop Capital maintained its Hold rating on shares of Yum! Brands (NYSE:YUM), with a steady price target of $143.00. The firm's analyst reported that checks with Taco Bell U.S. franchisees revealed same-store sales growth aligning with or slightly surpassing expectations in the third quarter to date.
Taco Bell, a segment of Yum! Brands, has seen a modest acceleration in same-store sales growth. Initially, growth was around 3% in the first few weeks of the quarter but has since increased to approximately 4% in the recent 4-5 weeks. Consequently, quarter-to-date growth stands between 3-4%. These figures suggest that Taco Bell's performance is on track or even slightly above the estimated and consensus 3% growth for the third quarter.
The analysis of two-year stacked growth rates indicates an improvement for Taco Bell. The current 3-4% growth in the third quarter translates to an 11-12% increase on a two-year stacked basis. This is a rise from the 9% reported in the previous quarter of 2024. Furthermore, the implied three-year stacked growth rates for the third quarter are 17-18%, which is consistent with or slightly better than the last quarter's results.
Loop Capital's decision to maintain the Hold rating and the price target for Yum! Brands is based on an 18 times multiple of the estimated 2025 enterprise value to EBITDA (EV/EBITDA). The firm's position reflects the current sales trends observed at Taco Bell franchisees across the United States.
Yum! Brands' stock continues to be evaluated by Loop Capital with a cautious outlook, as the Hold rating suggests a neutral stance on the stock's potential for growth or decline. The company's performance, particularly in its Taco Bell operations, will likely continue to be monitored for signs of sustained growth or emerging challenges.
In other recent news, Yum! Brands reported a 10% growth in core operating profit for the second quarter of 2024, driven by affordable consumer options, digital expansion, and sustainable practices. Taco Bell and KFC International were significant contributors to the system sales and operating profit growth. However, the company noted a 3% decline in comparable sales for KFC and Pizza Hut.
The firm is planning for further expansion in the UK and Canada, primarily focusing on Pizza Hut, and expects at least 8% core operating profit growth in 2025. Yum! Brands also announced a quarterly dividend of $0.67 per common share. These are the recent developments in the company's business operations and performance.
InvestingPro Insights
As Yum! Brands (NYSE:YUM) continues to demonstrate steady same-store sales growth through its Taco Bell segment, it's important to consider the company's financial health and market position. According to recent data from InvestingPro, Yum! Brands has a market capitalization of $38.51 billion and is trading at a P/E ratio of 24.78, which is high relative to near-term earnings growth. This suggests that investors are paying a premium for the company's earnings compared to its growth potential.
Despite the high P/E ratio, Yum! Brands has a solid track record of maintaining dividend payments, having done so for 21 consecutive years, and has raised its dividend for six consecutive years, demonstrating a commitment to returning value to shareholders.
InvestingPro Tips for Yum! Brands highlight a couple of notable points. Firstly, the stock generally trades with low price volatility, which may appeal to risk-averse investors seeking stability. Additionally, the company's liquid assets exceed its short-term obligations, indicating a strong liquidity position that can support operational needs and strategic initiatives.
For readers interested in further analysis, there are an additional 17 InvestingPro Tips available on the Yum! Brands page at InvestingPro. These tips could provide deeper insights into the company's valuation, dividend growth, and future profitability predictions, enriching investors' perspectives on Yum! Brands' potential as an investment.
Overall, the data and tips from InvestingPro offer a more nuanced view of Yum! Brands' financial standing and market valuation, which can be valuable to investors considering the company's stock amidst the current sales trends at Taco Bell.
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