Yum! Brands
YUM
$149.77
-2.02%
Yum! Brands, Inc. is a global restaurant franchisor operating in the quick-service and fast-casual segments, with a portfolio of iconic brands including KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill. The company is a dominant global player, ranking as the world's second-largest restaurant firm by systemwide sales, distinguished by its asset-light, 97% franchised model which generates stable, recurring revenue from royalties and marketing fees. The current investor narrative centers on the company's ability to drive growth through international expansion, particularly in emerging markets, and its focus on digital sales and value-oriented offerings to navigate a challenging consumer spending environment, as evidenced by recent news highlighting the potential for QSR stocks to gain from consumer trade-down behavior.…
YUM
Yum! Brands
$149.77
Related headlines
YUM 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $194.70 and implied upside of +30.0% versus the current price.
Average Target
$194.70
6 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
6
covering this stock
Price Range
$120 - $195
Analyst target range
Analyst coverage for Yum! Brands is limited, with only 6 analysts providing estimates, which can lead to higher volatility and less efficient price discovery typical for a company of its size. The consensus leans bullish, with recent institutional ratings including actions like 'Overweight' from JP Morgan and 'Buy' from TD Cowen, though there is a mix of 'Neutral' and 'Equal Weight' ratings as well, indicating cautious optimism. The average revenue estimate for the company is $12.26 billion, with a range from $11.60 billion to $12.55 billion, and the average EPS estimate is $11.16, ranging from $10.39 to $11.51; the wide spread between the high and low EPS targets, a difference of over 10%, signals a meaningful degree of uncertainty among analysts regarding the company's near-term earnings power.
Bulls vs Bears: YUM Investment Factors
The evidence presents a balanced but cautious picture, with the bear side currently holding a slight edge due to valuation concerns and decelerating momentum. The bull case is anchored in YUM's defensive, cash-generative business model and its potential to benefit from consumer trade-down behavior. However, the bear case highlights a premium valuation not fully supported by its modest growth rate and recent margin pressure. The single most important tension in the investment debate is whether YUM's premium valuation, justified by its stable franchise cash flows, can be sustained in the face of potential earnings multiple compression if margin trends weaken or growth fails to accelerate.
Bullish
- Robust Franchise Model Cash Flow: The 97% franchised model generates highly predictable, recurring revenue from royalties, evidenced by strong free cash flow of $1.64 billion TTM. This asset-light structure supports a robust operating margin of 30.80% and provides capital for shareholder returns and reinvestment.
- Defensive Growth Amid Trade-Down: Recent news highlights the potential for QSR stocks like YUM to benefit as consumers trade down from more expensive dining options due to economic pressures. This positions its value-oriented brands (KFC, Taco Bell) for resilient demand, supporting its 6.44% YoY revenue growth.
- Strong Profitability & Margin Profile: The company maintains high profitability with a trailing net margin of 18.98% and a gross margin of 46.17%. The forward P/E of 21.17x, a discount to the trailing 26.98x, implies the market expects earnings growth from this efficient model.
- Significant Free Cash Flow Generation: With $1.64 billion in TTM free cash flow, YUM has ample financial flexibility. This supports its dividend (1.88% yield) and share buybacks, which are a key part of its capital return strategy, as indicated by the negative shareholder equity.
Bearish
- Premium Valuation Relative to Growth: The trailing P/E of 26.98x trades at a premium to the sector, while revenue growth is modest at 6.44% YoY. The high PEG ratio of 4.59 suggests the stock is expensive relative to its growth prospects, creating vulnerability to multiple compression.
- Recent Margin Compression: Quarterly operating margin declined from 33.64% in Q3 2025 to 29.36% in Q4 2025. This sequential pressure, if sustained, could threaten the core profitability narrative of the franchise model and dampen earnings growth.
- Persistent Underperformance vs. Market: The stock has significantly lagged the S&P 500, with a 1-year relative strength of -22.47. Recent momentum is also weak, with a 3-month price change of +1.84% underperforming the S&P's +4.14%, indicating a lack of positive catalyst recognition.
- High Financial Leverage: The debt-to-equity ratio of -1.63 and negative ROE of -21.28% reflect significant financial leverage and aggressive share repurchases. While manageable, this increases sensitivity to rising interest rates and limits financial flexibility in a downturn.
YUM Technical Analysis
The stock is in a sustained uptrend over the longer term, evidenced by a 1-year price change of +6.57% and a 6-month gain of +14.58%, though it has significantly underperformed the broader market, as shown by a relative strength of -22.47 over the past year. Currently trading at $158.36, the price sits approximately 65% of the way up from its 52-week low of $137.33 towards its high of $169.39, indicating a position of strength but not extreme overextension. Recent momentum shows a positive but decelerating trend, with a 3-month price change of +1.84% and a 1-month change of +3.03%, both of which lag the S&P 500's respective gains of +4.14% and +9.98%, suggesting the stock is losing relative momentum despite its absolute gains. The stock's beta of 0.66 indicates it is approximately 34% less volatile than the broader market, which is typical for a large-cap, defensive consumer staple, and the 52-week high of $169.39 serves as a clear near-term resistance level, while the 52-week low of $137.33 provides a key support zone; a decisive breakout above resistance would signal a continuation of the bullish trend, while a breakdown below support could indicate a more significant correction.
Beta
0.60
0.60x market volatility
Max Drawdown
-10.9%
Largest decline past year
52-Week Range
$137-$169
Price range past year
Annual Return
+2.8%
Cumulative gain past year
| Period | YUM Return | S&P 500 |
|---|---|---|
| 1m | -7.2% | +8.2% |
| 3m | -8.3% | +9.0% |
| 6m | +0.5% | +10.5% |
| 1y | +2.8% | +26.5% |
| ytd | -0.5% | +8.9% |
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YUM Fundamental Analysis
Revenue growth has been positive but modest, with the most recent quarterly revenue of $2.51 billion representing a year-over-year increase of 6.44%; segment data reveals KFC as the largest revenue driver at $1.04 billion, followed by Taco Bell at $997 million, Pizza Hut at $303 million, and The Habit Burger Grill at $174 million. The company is highly profitable, with a net income of $535 million in Q4 2025 and a trailing net margin of 18.98%; gross margins are robust at 46.17% and operating margins stand at 30.80%, reflecting the efficiency of its franchise-heavy model, though quarterly data shows some margin compression from Q3 to Q4 2025, with the operating margin declining from 33.64% to 29.36%. Financial health is strong, with a current ratio of 1.35 indicating solid short-term liquidity, and the company generated substantial free cash flow of $1.64 billion over the trailing twelve months, providing ample resources for dividends, share buybacks, and reinvestment; however, the negative return on equity of -21.28% and a debt-to-equity ratio of -1.63 are accounting artifacts stemming from significant shareholder equity deficits, which is common for mature, leveraged companies with aggressive share repurchase programs.
Quarterly Revenue
$2.5B
2025-12
Revenue YoY Growth
+0.06%
YoY Comparison
Gross Margin
+0.44%
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 the company's consistent profitability with a net income of $535 million, the primary valuation metric selected is the Price-to-Earnings (P/E) ratio. The trailing P/E stands at 26.98x, while the forward P/E is lower at 21.17x, indicating the market expects earnings growth; the forward P/E is based on an estimated EPS of $11.16, which implies a significant year-over-year increase from the most recent quarterly EPS of $1.92. Compared to sector averages, Yum's trailing P/E of 26.98x trades at a premium; while direct industry averages are not provided in the data, the forward P/E of 21.17x and an EV/EBITDA of 19.14x suggest the market is pricing in a premium for its stable, franchise-based cash flows and global scale. Historically, the stock's own trailing P/E has fluctuated, with recent quarterly data showing values ranging from 19.65x at the end of 2025 to 43.54x in Q1 2025; the current trailing P/E of 26.98x sits above the lower end of this recent range, suggesting the market is not pricing the stock at deeply discounted levels relative to its own history, but also not at peak optimism.
PE
27.0x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 17x~44x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
19.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: YUM's primary financial risk stems from its leveraged balance sheet, evidenced by a debt-to-equity ratio of -1.63 and negative shareholder equity, which is a structural feature of its aggressive capital return policy. While free cash flow is strong at $1.64 billion TTM, a sustained increase in interest expenses could pressure net income. Operationally, the company showed margin compression in its most recent quarter, with the operating margin falling 428 basis points from Q3 to Q4 2025; a continuation of this trend would directly undermine its premium valuation thesis. Revenue concentration is moderate, with KFC and Taco Bell comprising the majority of segment sales, leaving the company exposed to brand-specific missteps.
Market & Competitive Risks: The stock trades at a premium valuation with a trailing P/E of 26.98x, creating a clear risk of multiple compression if growth disappoints or investor sentiment shifts away from defensive staples. Competitive intensity in the QSR space is high, as highlighted by recent news on Domino's facing headwinds, and YUM's international focus (72% of locations) exposes it to geopolitical and currency risks. The stock's low beta of 0.66 offers downside protection but also means it may lag in strong bull markets, as seen in its significant 1-year underperformance (-22.47 relative strength).
Worst-Case Scenario: The most damaging scenario involves a combination of sustained margin erosion, a slowdown in international unit growth, and a broader market de-rating of premium-valued consumer stocks. This could trigger analyst downgrades from the current cautious optimism and a re-rating towards the lower end of its historical P/E range (near 20x). The realistic downside would be a test of the 52-week low of $137.33, representing a potential loss of approximately -13% from the current price of $158.36. A breach of that level could see a further decline towards the $130 range, aligning with a max drawdown historically around -14%.