On Thursday, BMO Capital Markets maintained its Market Perform rating on Yum! Brands (NYSE:YUM) but slightly raised the shares target from $133.00 to $135.00.
The adjustment comes after the company reported its first-quarter earnings for 2024, which showed earnings per share (EPS) of $1.15, missing the consensus by $0.05. This shortfall was attributed to broadly softer comparable store sales (comps) that could not be fully mitigated by reduced general and administrative expenses (G&A) and favorable tax rates.
The firm noted that while trends are showing signs of improvement, with the Middle East region beginning to recover, Yum! Brands' comparable sales trajectory for 2024 is anticipated to be weaker.
However, this expected dip in comps is likely to be counterbalanced by additional cuts in G&A, which should help the company to achieve profit growth in line with its targets. These anticipated G&A reductions have led to a slight increase in earnings estimates and contributed to the upward revision of the stock's price target.
BMO Capital's commentary highlighted a balanced risk/reward outlook for Yum! Brands. The analyst expressed concerns regarding the company's comparable sales outlook in a challenging operating climate. Nevertheless, this concern is tempered by a favorable long-term perspective on Yum! Brands' potential for unit growth and expansion.
Yum! Brands, the parent company of well-known fast-food chains such as KFC, Pizza Hut, and Taco Bell, operates in a competitive and ever-changing industry.
The company's ability to manage costs and navigate economic pressures while expanding its global presence is critical for its ongoing financial performance. The latest price target suggests that BMO Capital sees potential for the company to maintain its growth trajectory despite near-term headwinds.
InvestingPro Insights
In light of BMO Capital Markets' recent analysis of Yum! Brands, a deeper dive into the company's financial metrics can provide additional context for investors. According to real-time data from InvestingPro, Yum! Brands currently holds a market capitalization of $38.06 billion and a P/E ratio of 25.07, indicating a premium valuation relative to near-term earnings growth. The company's revenue for the last twelve months as of Q1 2024 stands at $7.029 billion, with a modest growth of 1.28%. Despite the slight miss in quarterly earnings per share, Yum! Brands has demonstrated a commitment to shareholder returns, having raised its dividend for 6 consecutive years and maintained dividend payments for 21 consecutive years.
InvestingPro Tips highlight that while 13 analysts have revised their earnings downwards for the upcoming period, the stock generally trades with low price volatility, which may appeal to investors seeking stability. Moreover, Yum! Brands' liquid assets exceed short-term obligations, suggesting a solid financial position for the company. For those interested in exploring further, there are additional InvestingPro Tips available, providing a more comprehensive analysis of Yum! Brands' financial health and stock performance. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and unlock the full potential of InvestingPro's insights.
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