Yum! Brands
YUM
$153.28
-2.37%
Yum! Brands, Inc. is a global quick-service restaurant company that franchises and operates iconic brands including KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill, with over 63,000 restaurants across 155 markets. As the world's second-largest restaurant firm by systemwide sales, it generates over $68 billion annually, with 97% of its locations franchised, creating a highly asset-light, royalty-driven business model. The current investor narrative centers on the strategic divestiture of Pizza Hut, which was sold for $2.3 billion to streamline the portfolio and focus on higher-growth KFC and Taco Bell brands, while also addressing a challenging consumer environment and rising competition in the QSR sector. This portfolio reshaping, coupled with digital innovation and international expansion, is driving both optimism about margin expansion and concerns about near-term revenue disruption.…
YUM
Yum! Brands
$153.28
Related headlines
Investment Opinion: Should I buy YUM Today?
Rating: Buy. YUM is a high-quality franchise operator with a strong portfolio of iconic brands, and the Pizza Hut divestiture should streamline operations and boost margins. The consensus rating is Buy with an average target of $174.33, implying 13.7% upside, and the forward PE of 20.78x is reasonable given expected earnings growth. Key supporting evidence includes Q1 revenue growth of 15.2%, net margin expansion to 21.0%, operating margin of 31.3%, and strong free cash flow of $1.649B. However, the stock trades at a premium to the industry (PE 27x vs. 22x), and the PEG of 4.61 suggests overvaluation relative to growth. The biggest risks are consumer spending weakness, execution of the divestiture, and high leverage. This Buy would be downgraded to Hold if revenue growth falls below 10% or if the PE exceeds 30x, and upgraded if the PE compresses below 20x. Overall, YUM is fairly valued relative to its history but slightly overvalued versus peers, yet the strategic moves justify a premium.
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YUM 12-Month Price Forecast
The AI assessment is cautiously bullish, driven by strong operational performance and strategic portfolio reshaping. The main risks are valuation and macro headwinds, but the company's asset-light model and margin expansion provide a solid foundation. If YUM can execute the divestiture smoothly and maintain growth, the stock is likely to appreciate. However, a downgrade to neutral would occur if revenue growth decelerates below 10% or if the PE expands above 30x, while an upgrade to high confidence would require sustained margin improvement and positive same-store sales trends.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $174.57 and implied upside of +13.9% versus the current price.
Average Target
$174.57
0 analysts
Implied Upside
+13.9%
vs. current price
Analyst Count
—
covering this stock
Price Range
$147 - $200
Analyst target range
YUM has coverage from 21 analysts, with a consensus recommendation of 'Buy' (mean rating 2.23). The average target price is $174.33, implying 13.7% upside from the current price of $153.28. The distribution includes 12 Buy, 7 Hold, and 2 Sell ratings, indicating a moderately bullish sentiment. The target range spans from $147 (low) to $200 (high), with the high target assuming successful execution of the Pizza Hut divestiture and accelerated growth at KFC and Taco Bell, while the low target reflects risks from consumer spending weakness and integration challenges. Recent ratings actions include Morgan Stanley upgrading to Overweight in June 2026, while Citigroup maintained Neutral, showing mixed but generally positive sentiment. The wide spread between low and high targets ($53) signals uncertainty about the impact of the divestiture and the consumer environment.
Bulls vs Bears: YUM Investment Factors
YUM presents a mixed picture: strong operational execution and strategic portfolio reshaping are offset by valuation concerns and macro headwinds. The bull case is supported by robust revenue growth, margin expansion, and a clear strategic direction, while the bear case highlights underperformance, high valuation, and consumer weakness. Currently, the bull case has slightly stronger evidence given the company's proven ability to grow and improve profitability, but the key tension lies in whether the Pizza Hut divestiture will unlock value as expected or create short-term disruption that weighs on earnings. The resolution of this tension will likely determine the stock's trajectory over the next 12 months.
Bullish
- Strong Q1 Revenue Growth: Q1 2026 revenue grew 15.2% YoY to $2.059B, driven by KFC and Taco Bell, showing robust demand despite a challenging consumer environment.
- Margin Expansion and Asset-Light Model: Net margin improved to 21.0% in Q1 2026 from 14.2% a year ago, with operating margin at 31.3%, reflecting the benefits of a 97% franchised model and operational leverage.
- Pizza Hut Divestiture Unlocks Value: The $2.3B sale of Pizza Hut streamlines the portfolio, reduces revenue volatility, and allows focus on higher-growth KFC and Taco Bell, potentially boosting long-term margins and returns.
- Analyst Consensus Buy with 13.7% Upside: 21 analysts rate YUM a Buy with an average target of $174.33, implying 13.7% upside from the current $153.28, reflecting confidence in the strategic direction.
Bearish
- Underperformance vs. Market: YUM's 1-year return of +6.33% lags the S&P 500's +18.19%, and relative strength is negative across all timeframes, indicating persistent underperformance.
- High Valuation Premium: Trailing PE of 27.06x and forward PE of 20.78x are above the industry average of 22x, with a PEG of 4.61, suggesting the stock is priced for perfection.
- Negative Equity and High Leverage: Debt-to-equity of -1.63 reflects negative equity due to aggressive buybacks, increasing financial risk and limiting balance sheet flexibility.
- Consumer Spending Weakness: Rising gas prices and inflation are pressuring discretionary spending, and YUM's QSR peers like Domino's are seeing sales slowdowns, signaling potential headwinds for YUM.
YUM Technical Analysis
YUM's price trend over the past year shows a modest uptrend, with a 1-year price change of +6.33%, but the stock is currently trading at $153.28, which is 90% of its 52-week range (low $137.33, high $170.14). This positioning near the upper end of the range suggests underlying strength, yet the recent pullback from the July high of $167.49 indicates potential overextension and profit-taking. The stock's beta of 0.56 implies it is significantly less volatile than the broader market, making it a defensive holding, but its relative strength underperforms the S&P 500, which gained 18.19% over the same period.
Beta
0.56
0.56x market volatility
Max Drawdown
-12.8%
Largest decline past year
52-Week Range
$137-$170
Price range past year
Annual Return
+6.3%
Cumulative gain past year
| Period | YUM Return | S&P 500 |
|---|---|---|
| 1m | -5.1% | +0.3% |
| 3m | -3.2% | +4.0% |
| 6m | -1.4% | +8.3% |
| 1y | +6.3% | +20.2% |
| ytd | +1.9% | +9.6% |
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YUM Fundamental Analysis
Revenue growth has been robust, with Q1 2026 revenue of $2.059 billion, up 15.2% year-over-year, driven by strong performance at KFC and Taco Bell, while Pizza Hut's divestiture will reduce future revenue but improve margins. The company's net income of $432 million in Q1 2026 represents a net margin of 21.0%, up from 14.2% in Q1 2025, reflecting operational leverage and the shift to a more franchised model. Gross margin stands at 44.7%, and operating margin at 31.3%, both above industry averages, indicating efficient cost management. YUM's balance sheet is highly leveraged, with a debt-to-equity ratio of -1.63 (negative equity due to buybacks), but it generates strong free cash flow of $1.649 billion TTM, covering dividends and buybacks. The current ratio of 1.35 suggests adequate liquidity, and the company's ROE is negative (-21.3%) due to negative equity, but ROA of 22.6% highlights efficient asset utilization.
Quarterly Revenue
$2.1B
2026-03
Revenue YoY Growth
+15.2%
YoY Comparison
Gross Margin
44.7%
Latest Quarter
Free Cash Flow
$1.6B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is YUM Overvalued?
Given positive net income, the PE ratio is the primary valuation metric. YUM's trailing PE is 27.06x, while forward PE is 20.78x, indicating the market expects earnings growth of about 30% (implied by the gap). The PEG ratio of 4.61 suggests the stock is expensive relative to its growth rate, but this is skewed by the Pizza Hut divestiture. Compared to the industry average PE of 22x (from valuation data), YUM trades at a 23% premium, justified by its superior margins and franchise model. Historically, YUM's PE has ranged from 17x to 44x over the past five years, with the current 27x near the middle, suggesting fair valuation. The PS ratio of 5.12x is also above the industry average of 3.5x, reflecting the market's premium for its asset-light model.
PE
27.1x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 17x~36x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
19.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial risks are significant due to YUM's high leverage, with a debt-to-equity ratio of -1.63, indicating negative equity from extensive buybacks. This limits financial flexibility and increases vulnerability to rising interest rates, as interest expense of $128M in Q1 2026 consumes a substantial portion of operating income. However, strong free cash flow of $1.649B TTM and a current ratio of 1.35 provide some cushion, but the negative equity is a red flag for balance sheet strength. Additionally, the Pizza Hut divestiture will reduce revenue, and while it improves margins, it also reduces scale, potentially impacting earnings stability in the near term.