Yum! Brands
YUM
$162.39
-1.73%
Yum! Brands is a global quick-service restaurant company operating the KFC, Pizza Hut, Taco Bell, and Habit Burger Grill chains, with over 63,000 restaurants across 155 markets. As the world's second-largest restaurant firm by systemwide sales, its business model is heavily franchised (97% of stores), generating recurring royalty and marketing fee income. The current investor narrative centers on the strategic sale of Pizza Hut for $2.3 billion to streamline the portfolio and strengthen the balance sheet, while navigating a challenging consumer environment and focusing on growth at KFC and Taco Bell.…
YUM
Yum! Brands
$162.39
Related headlines
Investment Opinion: Should I buy YUM Today?
Rating: Hold. YUM is a high-quality franchise business with improving fundamentals, but its premium valuation limits upside. The consensus analyst rating is bullish (2 Overweight, 1 Outperform, 1 Buy, 2 Neutral), with an average EPS estimate of $11.16 for the current year. The thesis is that the Pizza Hut sale and accelerating growth at KFC/Taco Bell will drive earnings, but the stock already prices in much of this optimism.
Supporting Evidence: YUM's trailing P/E of 27.1x is above the industry average of 22x, but its forward P/E of 22.1x is in line, implying expected earnings growth of ~23%. Revenue growth accelerated to 6.4% YoY in Q4 2025, and operating margins expanded to 29.4%. Free cash flow of $1.64B TTM supports a 1.88% dividend yield. The stock trades near its 52-week high ($169.39), suggesting limited near-term upside unless earnings surprise.
Risks & Conditions: The Hold rating would upgrade to Buy if the forward P/E compresses below 20x or if revenue growth sustains above 8%. It would downgrade to Sell if growth decelerates below 4% or if the Pizza Hut sale faces regulatory hurdles. Overall, YUM is fairly valued relative to its history and peers, trading near the middle of its 5-year P/E range (17x-44x).
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YUM 12-Month Price Forecast
YUM's fundamentals are improving, but the stock's premium valuation and recent underperformance relative to the market warrant caution. The Pizza Hut sale is a clear positive catalyst, but its benefits are partially priced in. The base case of steady growth and modest multiple compression seems most likely, with a 50% probability. Upside depends on faster-than-expected growth or multiple expansion, while downside risks from consumer weakness and execution missteps are balanced. I would upgrade to bullish if revenue growth sustains above 6% and the forward P/E stays below 22x; downgrade to bearish if growth falls below 4% or the sale stumbles.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $211.11 and implied upside of +30.0% versus the current price.
Average Target
$211.11
6 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
6
covering this stock
Price Range
$130 - $211
Analyst target range
YUM is covered by 6 analysts, with a consensus leaning bullish: ratings include 2 Overweight, 1 Outperform, 1 Buy, and 2 Neutral/Equal Weight. The average EPS estimate for the current fiscal year is $11.16, with a low of $10.35 and high of $11.52. Revenue estimates average $12.26 billion, ranging from $11.57B to $12.56B. While specific price targets are not provided, the consensus recommendation implies a generally positive outlook. Recent rating actions show stability: JP Morgan (Overweight), Evercore (Outperform), Citigroup (Neutral), Wells Fargo (Equal Weight), TD Cowen (Buy), and an upgrade from Gordon Haskett (Hold to Buy) in January 2026. The lack of a wide dispersion in ratings suggests moderate conviction. The $2.3 billion Pizza Hut sale is a key catalyst that analysts are likely incorporating into their models, potentially driving upward revisions. Investors should watch for target price updates following the transaction's close.
Bulls vs Bears: YUM Investment Factors
YUM presents a mixed picture: strong operational momentum with accelerating revenue, expanding margins, and a strategic portfolio simplification via the Pizza Hut sale. However, the stock trades at a premium valuation (27.1x trailing P/E vs. industry 22x) and has underperformed the market over the past year. The bull case hinges on successful execution of the Pizza Hut sale and continued growth at KFC/Taco Bell, while the bear case centers on valuation risk and a challenging consumer backdrop. Currently, the bull case has slightly stronger evidence given the recent acceleration in fundamentals and the catalyst from the divestiture. The key tension is whether the premium valuation can be sustained by earnings growth; if growth disappoints, the stock could de-rate significantly.
Bullish
- Pizza Hut Sale Unlocks Value: The $2.3 billion sale of Pizza Hut streamlines the portfolio, strengthens the balance sheet, and allows focus on higher-growth KFC and Taco Bell brands. This strategic move is expected to improve margins and returns, with analysts viewing it positively.
- Accelerating Revenue Growth: Revenue growth accelerated from 1.9% in Q2 2025 to 6.4% in Q4 2025, driven by KFC ($1.041B) and Taco Bell ($0.997B). This trend indicates improving operational momentum and market share gains.
- Expanding Profit Margins: Operating margin expanded to 29.4% in Q4 2025 from 27.8% a year ago, while net margin rose to 21.3% from 17.9%. This reflects operational leverage and cost controls, enhancing profitability.
- Strong Free Cash Flow Generation: YUM generated $482 million in free cash flow in Q4 2025, with free cash flow per share of $1.73. This cash generation supports dividends (1.88% yield) and share buybacks, rewarding shareholders.
Bearish
- Premium Valuation vs. Peers: Trailing P/E of 27.1x is a 23% premium to the restaurant industry average of ~22x. The PEG ratio of 4.6x suggests the stock is expensive relative to near-term earnings growth expectations.
- Negative Shareholders' Equity: Debt-to-equity of -1.63 and negative equity (due to buybacks and debt) indicate financial leverage. While common for franchised firms, it increases risk if cash flows decline.
- Underperformance vs. Market: YUM's 1-year relative strength vs. SPY is -9.4%, meaning it has lagged the broader market despite absolute gains. This suggests the stock may be a laggard in a strong market.
- Challenging Consumer Environment: Rising gas prices and weak consumer spending pressure QSR sales. News indicates Domino's and other peers face headwinds, which could impact YUM's same-store sales growth.
YUM Technical Analysis
YUM is in a broad uptrend, with the stock up 9.7% over the past year and currently trading at 97.2% of its 52-week range (close to the $169.39 high). The price sits at $164.73, near the top of the range, suggesting strong momentum but also potential overextension after a sustained rally. The 1-year relative strength versus SPY is -9.4%, indicating the stock has underperformed the broader market despite its absolute gains. Short-term momentum is accelerating sharply: the 1-month price change is +12.4% and the 3-month change is +5.5%, both outpacing the 1-year trend. This recent acceleration, combined with a 1-month relative strength of +13.6% versus SPY, signals a bullish short-term breakout. However, the 1-year relative underperformance suggests this may be a catch-up move rather than a new sustained trend; traders should watch for confirmation above the 52-week high. The 52-week high of $169.39 acts as immediate resistance; a breakout above that level would signal a continuation of the uptrend and could open the door to further gains. Support lies at the 52-week low of $137.33, a 16.6% decline from current levels. The stock's beta of 0.56 indicates it is significantly less volatile than the market, meaning it tends to decline less during selloffs but also lag during rallies. This low beta supports a defensive positioning within a portfolio.
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
+7.7%
Cumulative gain past year
| Period | YUM Return | S&P 500 |
|---|---|---|
| 1m | +7.1% | +2.0% |
| 3m | +0.4% | +10.6% |
| 6m | +4.4% | +8.3% |
| 1y | +7.7% | +20.4% |
| ytd | +7.9% | +10.2% |
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YUM Fundamental Analysis
Revenue grew 6.4% year-over-year in Q4 2025 to $2.514 billion, accelerating from the 3.7% growth in Q3 2025 and 1.9% in Q2 2025. The multi-quarter trend shows improving growth, driven by KFC ($1.041B) and Taco Bell ($0.997B) segments, while Pizza Hut ($0.303B) remains a drag. The sale of Pizza Hut should remove this underperforming asset and sharpen focus on higher-growth brands. Net income for Q4 2025 was $535 million, up from $423 million in Q4 2024, with diluted EPS of $1.92 versus $1.49 a year ago. Gross margin improved to 44.5% from 44.4% in the prior-year quarter, while operating margin expanded to 29.4% from 27.8%, reflecting operational leverage and cost controls. Net margin rose to 21.3% from 17.9%, indicating strong profitability. The company is solidly profitable with expanding margins, a positive sign for the investment case. YUM generated $617 million in operating cash flow and $482 million in free cash flow in Q4 2025, with free cash flow per share of $1.73. The company has a current ratio of 1.35, indicating adequate liquidity, but a negative debt-to-equity ratio of -1.63 due to negative shareholders' equity (common for companies with high share buybacks and debt). Total debt is manageable relative to cash flows, with an interest coverage ratio of 5.55. The $2.3 billion Pizza Hut sale will further strengthen the balance sheet and provide capital for reinvestment or shareholder returns.
Quarterly Revenue
$2.5B
2025-12
Revenue YoY Growth
+6.44%
YoY Comparison
Gross Margin
44.51%
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?
Since net income is positive, the primary valuation metric is the P/E ratio. The trailing P/E is 27.1x, while the forward P/E is 22.1x, implying the market expects earnings growth of roughly 23% over the next year. The gap between trailing and forward multiples suggests investors are pricing in a meaningful earnings recovery or acceleration. Compared to the restaurant industry average P/E of approximately 22x (based on sector data), YUM trades at a 23% premium on a trailing basis but roughly in line on a forward basis. This premium is partially justified by YUM's asset-light franchise model, high margins, and strong cash generation, but investors should monitor whether growth can sustain the multiple. Historically, YUM's trailing P/E has ranged from about 17x to 44x over the past five years. The current 27.1x is near the middle of that range, suggesting the stock is neither overly expensive nor a clear bargain. The PEG ratio of 4.6x indicates that the P/E is high relative to near-term earnings growth expectations, which could signal overvaluation if growth disappoints.
PE
27.1x
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 negative shareholders' equity (-$5.7B implied by debt-to-equity of -1.63) and total debt of ~$11B (interest coverage 5.55x) create leverage risk. While free cash flow of $1.64B TTM covers interest, a sustained downturn could pressure debt servicing. The company's reliance on franchise royalties (64% of revenue) means store-level stress at KFC or Taco Bell could reduce income. Additionally, the Pizza Hut sale for $2.3B introduces transition risk and may temporarily depress earnings.
Market & Competitive Risks: YUM's trailing P/E of 27.1x is a 23% premium to the restaurant industry average, making it vulnerable to multiple compression if growth slows. The stock's beta of 0.56 indicates low market correlation, but its 1-year relative underperformance (-9.4% vs. SPY) suggests it may lag in rallies. Competitive pressures from Domino's and McDonald's, along with rising gas prices squeezing consumer spending, pose headwinds. News of Domino's hitting a 52-week low highlights sector challenges.
Worst-Case Scenario: A severe consumer recession, combined with execution missteps post-Pizza Hut sale, could drive YUM's stock to its 52-week low of $137.33, a 16.6% decline from the current $164.73. If earnings disappoint and the P/E contracts to 20x (historical low), the stock could fall to ~$120, representing a -27% loss. The realistic downside is -16.6% to the 52-week low.
FAQ
The key risks are: 1) Valuation risk: trailing P/E of 27.1x is a 23% premium to peers, making the stock vulnerable to de-rating if growth slows. 2) Consumer spending risk: rising gas prices and weak economic data could pressure same-store sales, especially at value-oriented QSR chains. 3) Execution risk: the $2.3 billion Pizza Hut sale may face delays or fail to deliver expected benefits. 4) Financial leverage: negative shareholders' equity and debt-to-equity of -1.63 increase financial risk if cash flows decline. The most severe risk is a recession driving the stock to its 52-week low of $137.33, a 16.6% loss from current levels.
The 12-month forecast is mixed: the base case (50% probability) sees the stock trading between $160 and $175, driven by steady earnings growth and the Pizza Hut sale. The bull case (25% probability) targets $175-$185 if growth accelerates and the market rewards the streamlined portfolio. The bear case (25% probability) sees the stock falling to $137-$150 if consumer spending weakens or the sale stumbles. The most likely scenario is the base case, with the stock hovering near current levels as the market digests the divestiture. Key assumptions include revenue growth of 4-6% and operating margins around 29%.
YUM is fairly valued relative to its history but slightly overvalued versus peers. The trailing P/E of 27.1x is above the restaurant industry average of 22x, indicating a premium for its franchise model and margins. However, the forward P/E of 22.1x is in line with the industry, implying expected earnings growth of ~23%. Historically, YUM's P/E has ranged from 17x to 44x over the past five years, so the current 27.1x is near the middle. The PEG ratio of 4.6x suggests the stock is expensive relative to near-term growth, but this is common for high-margin franchise businesses. Overall, the market is pricing in a reasonable growth trajectory, but any disappointment could lead to multiple compression.
YUM is a reasonable buy for investors seeking a defensive, income-generating stock with a catalyst from the Pizza Hut sale. The stock offers a 1.88% dividend yield, low beta of 0.56, and improving fundamentals (6.4% revenue growth, expanding margins). However, the trailing P/E of 27.1x is a 23% premium to the restaurant industry average, limiting upside potential. The consensus analyst target implies modest upside, but the stock is near its 52-week high. It is a good buy for long-term, risk-averse investors who value stability and income, but growth investors may find better opportunities elsewhere. The biggest downside risk is a consumer recession that pressures sales, potentially driving the stock to $137.33 (-16.6%).
YUM is better suited for long-term investment due to its defensive characteristics (beta 0.56), stable dividend yield (1.88%), and recurring franchise revenue model. The stock's low volatility and strong cash flow make it a core holding for income-focused portfolios. Short-term traders may find limited upside given the stock is near its 52-week high and has underperformed the market over the past year. The Pizza Hut sale provides a near-term catalyst, but the benefits will unfold over 12-18 months. A minimum holding period of 3-5 years is recommended to capture the full benefits of portfolio simplification and compounding dividends.