On Wednesday, Guggenheim maintained a positive stance on Yum! Brands (NYSE: NYSE:YUM), increasing the stock's price target from $145.00 to $155.00 while keeping a Buy rating. The adjustment follows recent investor meetings in New York with Yum! Brands' CFO Chris Turner and Kaitlyn Yocom from Investor Relations.
The meetings highlighted the company's robust global development engine and a rebound in KFC International, which had faced challenges in the Middle East in the fourth quarter. There was also a sense of optimism about the U.S. Taco Bell business, which is expected to benefit from a stronger innovation pipeline and value offerings throughout 2024.
Despite the positive outlook for Taco Bell and KFC International, the company does acknowledge ongoing regional difficulties for KFC U.S. and Pizza Hut U.S. Still, these challenges are somewhat mitigated by the fact that each brand contributes approximately 7% to Yum! Brands' total operating profit, according to the firm's estimates.
Guggenheim's decision to increase the price target to $155 is based on an expanded valuation multiple, from 25.5x to 27x. This change reflects a broader reassessment of valuation across the firm's coverage, particularly for businesses that demonstrate a consistent and compelling unit development outlook.
The firm has made no changes to its full-year 2024 earnings per share (EPS) estimate for Yum! Brands.
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