Yum! Brands YUM Stock Analysis: If you don’t already know, I like to eat as evidenced with my Yelp stock review. I am a bit of a food snob – I really try to avoid chain restaurants. But one of my guilty pleasures (and perhaps the longest love of my life) is Taco Bell!
There is no use in trying to dissuade me from eating there. I’ve heard it all and I just don’t care. I love being able to purchase roughly 12,000 calories of fake Mexican food for $5.28. As a matter of fact, the thought of analyzing their parent company Yum! Brands occurred to me when I discovered that Taco Bell will be placing nacho fries on their dollar menu!
I hope you appreciate that I am fairly transparent about my attitude towards companies. In this case, I am just passionately in love with this fast food mistress. But does that mean it’s worth investing in? Thankfully, we have the IDDA process by which to remove emotion and use data to understand if and when a stock is worth purchasing.
Before we get too into the method though, let me remind folks that Yum! Brands YUM Stock is more than just Taco Bell. Yum Brands is the parent company of Taco Bell, Kentucky Fried Chicken, Wing Street and Pizza Hut. Hopefully that’s not a surprise and it explains why you’ve seen mash-ups such as a Kentaco Hut (KFC, Taco Bell, and Pizza Hut in one restaurant).
It’s also intriguing that it appears, at a quick glance, that Yum! Brands YUM Stock is trading near an all-time high. Visa V Stock was able to push through that resistance ceiling so I am wondering if we’ll see the same thing with Yum!
Good to Know: Yum! Brands YUM Stock pays $0.30 in dividends, which is roughly 1.45% annually. The past dividend dates have been in January, but no date or amount has yet to be declared.
Yum! Brands YUM Stock (NYSE: YUM) was created in 1997 as Tricon Global Restaurants, Inc as a spin-off from PepsiCo’s fast food division. As part of this spin-off, Tricon moved from New York to Louisville, Kentucky which put them near the KFC Support Center.
Yum! used to operate other restaurants such as A&W (Burgers and Root Beer) and Long John Silvers (fast seafood). But these and other restaurants have since been sold or spun off. Of particular interest, there is a separate, publicly traded company known as Yum China – and we are not discussing that this week.
So we have a worldwide fast food brand trading at near an all time high. Let’s get into deeper analysis to see when the right time to enter may be.
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1- Fundamental Points: Yum! Brands YUM Stock
Who are they?
Yum! Brands (NYSE) operates out of Louisville, KY and their mission follows:
“Our mission is to build the world’s most loved, trusted and fastest growing restaurant brands. We are evolving KFC, Pizza Hut and Taco Bell into iconic, distinctive and relevant global brands.”
My first impression is that I am pleased with its brevity. Secondly, I am digging that they acknowledge the need to evolve and maintain importance on a global scale.
While Yum! Brands is one company now, Kentucky Fried Chicken, Taco Bell, and Pizza Hut all have their unique histories. KFC was founded by Colonel Sanders in 1930 in North Corbin, Kentucky. Taco Bell was founded by Glen Bell in 1962 in Downey, California. Pizza Hut was founded by Dan and Frank Carney in 1958 in Wichita, Kansas. Three unique restaurants starting in vastly different places all under the umbrella of one company.
Believe it or not, it wasn’t Yum! Brands YUM Stock that took these restaurants global. Their leadership had that foresight as KFC demonstrated by opening in China in 1987. It wasn’t until 1997 that the three companies left PepsiCo and became what is known as Yum! Brands today. Yum! continued aggressive growth that either owns or franchises over 43,000 restaurants across the globe. Recently, Yum split off into Yum! and Yum China with the latter focusing on growth specifically in China and the former focusing on core restaurants and franchising opportunities.
Yum! has been recognized as a diverse employer, but a quick look at their leadership board is a bit disappointing. Ten senior officers and only one of them is a woman. Hopefully, that is something they can address in the future. Regardless, let’s take a look at some numbers:
- Current Price: 82.76
- 52 Week Range: 62.36 – 84.29
- PE Ratio: 25.26
- EPS: 3.27
- Price 5 yrs ago: 47.04 (76% return over 5 years)
- Short % of Float: 1.44%
- ROE: N/A
So Yum! Brands YUM Stock probably didn’t make people rich but the numbers seem solid. Let’s take a look at the competition.
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Yum! Brands YUM Stock – The Competition
Per Morningstar, YUM Stock is competing against these companies:
- Compass Group
Those are our top 3 but remember – restaurants compete against each other in a variety of styles: fast, fast-casual (Chipotle), sit-down chain (Cracker Barrel). Assume that Yum! Brands YUM Stock is in competition with every restaurant knowing that they have McDonald’s in their sights!
What are they doing right?
First – take a look at this map obtained from the Yum! website:
Look at that global reach! By housing three different restaurants under their umbrella, Yum is able to deliver immediate menu diversity compared to a McDonalds and then offer infinitely more food choices because they can bring in three unique restaurants as opposed to one.
Unfortunately, Yum! Brand YUM Stock’s revenue has remained fairly stagnant – though they did have a great Q4 2016, it seems that they hover at about $1.4 billion in revenue per quarter. Their earnings report paints a rosier picture though as they’ve beat earnings projections four quarters in a row.
Good to Know: Yum! Brands YUM stock has beat earnings estimates four quarters in a row. Q4 earnings will most likely be reported February 8, 2018.
Additionally – Yum restaurants are known for offering something new almost monthly. Go to any Taco Bell, Pizza Hut, or KFC and you’ll notice a new special or menu item. Personally, I’m a fan of always being able to try something new (or typically repackaged) and it keeps me interested.
Finally – Yum tends to avoid bad press. Certainly in the U.S., many restaurant workers are fighting for higher wages, but typically the news focuses on McDonald’s employees striking. Yum restaurants also seem to avoid massive food poisoning scares like Chipotle.
So it seems right now that Yum! may be a safe, blue chip type stock. It’s not necessarily going to rock the boat or predict big earnings, but is fairly dependable. Let’s move on to the technical points to see what else we can discover.
2- Technical Points: Yum! Brands YUM Stock
For our second point of IDDA we’ll look at Yum’s technicals. Yum is trading just a few points below it’s all time high. Let’s take a look at some trends first.
There are three things I immediately like about this chart. First – the trend is upward. Second, using some quick math, Yum! Brands YUM Stock is up nearly 30% since April. Finally, there’s some decent volatility built into the stock which indicates possible entry points in the future!
Let’s add an Ichimoku cloud and a Fibonacci retracement to get some more info about where the stock may be heading.
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Performing the Fibonacci retracement, we can see that we have immediate support set at 79.23; however, a bullish Ichimoku cloud could be providing support at Yum’s current level. This means that Yum’s earnings statement could help Yum push through a new ceiling or fall to a new support level. Consensus estimates for Yum earnings is 0.80 which is a bit lofty for them and a miss could present a new buying opportunity.
Let’s see if there are other market indicators that may help us predict if there’s a shift coming.
3- Market Sentiment: Yum! Brands YUM Stock
Okay, we have a company that has beaten earnings estimates four quarters in a row, that is up nearly 30% in a nine month period and is reporting against loftier earnings goals in about a month. Let’s see if our options indicators can add anything to the story.
Right now, these options indicators are painting a short term (45-60 day) bearish picture. With that, I am apt to think that other trades are thinking Yum misses earnings and takes a small dive. However, that’s just my thought. Let’s go further into our investing strategy.
Yum! Brands YUM Stock Analysis – Investing Strategy
As it stands, I think there could be an opportunity in Yum! but it’s up to you to calculate your risk tolerance before deciding on the investment strategy that is suitable for your portfolio. If you feel like you’re struggling reading the charts or keeping up with the terms, I highly suggest taking a free master class to learn more!
Of note, Yum’s beta is 0.68 – which means it is 32% less volatile than the market.
As always, we provide Invest Diva’s calculations for important approximate levels, with regards to the Yum! Brands YUM Stock analysis.
|Support Levels||Turning Point||Resistance Levels|
There you have it! Full disclosure, as far as I know, Yum! is not a part of my portfolio but I will be watching the earnings statement on this and possibly putting in a couple of limit orders to capture Yum on the dip. Feel free to bring your questions about Yum! or other stocks, forex, or cryptocurrencies to our Investing Group. We’d love to hear your thoughts!