Yum! Brands
YUM
$153.28
-2.37%
Yum! Brands is a global quick-service restaurant company operating over 63,000 locations across 155 markets under the KFC, Pizza Hut, Taco Bell, and Habit Burger Grill banners, generating over $68 billion in systemwide sales. As the world's second-largest restaurant firm by dollar sales, it distinguishes itself through a highly franchised model (97% of stores) that generates recurring royalty and marketing fee income, providing stable cash flows and capital-light growth. The current investor narrative centers on the strategic sale of Pizza Hut for $2.3 billion to streamline the portfolio toward higher-growth KFC and Taco Bell concepts, while navigating a challenging consumer environment marked by rising gas prices and shifting dining habits. Recent news highlights Yum China's acquisition of the Pizza Hut brand in China, which eliminates future royalty payments and boosts margins, adding a layer of complexity to the company's transformation story.…
YUM
Yum! Brands
$153.28
Related headlines
Investment Opinion: Should I buy YUM Today?
Rating: Hold. Yum! Brands is a high-quality franchise operator with a strategic pivot underway, but the current valuation and decelerating growth warrant caution. The analyst consensus is Buy with an average target of $174.33, implying 17.1% upside, but the stock's recent underperformance and near-term headwinds suggest a balanced risk/reward.
Supporting Evidence: The company generates strong free cash flow ($1.649B TTM) and has expanded net margins to 21.0% from 14.2% YoY. Revenue growth of 15.2% in Q1 2026 is solid but decelerating. The forward P/E of 19.95x is more reasonable than the trailing 27.1x, reflecting expected earnings growth. However, the PEG ratio of 4.61x suggests the stock is priced for high growth that may not materialize. The dividend yield of 1.88% provides modest income.
Risks & Conditions: The Hold rating would upgrade to Buy if the stock pulls back to $137 (52-week low) or if revenue growth re-accelerates above 20%. It would downgrade to Sell if same-store sales turn negative or if the Pizza Hut sale faces regulatory hurdles. Overall, Yum appears fairly valued relative to its history and peers, with the forward P/E of 19.95x in line with the restaurant sector average of ~22x.
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YUM 12-Month Price Forecast
Yum! Brands is at a crossroads: the Pizza Hut sale could unlock value, but near-term consumer headwinds and decelerating growth create uncertainty. The stock's valuation is reasonable on a forward basis, but the trailing P/E premium suggests limited upside without acceleration. The neutral stance reflects balanced risks: the bull case depends on successful execution of the strategic pivot, while the bear case hinges on consumer weakness. A clearer catalyst, such as a strong Q2 earnings beat or closure of the Pizza Hut sale, would shift the stance to bullish.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $174.33 and implied upside of +13.7% versus the current price.
Average Target
$174.33
0 analysts
Implied Upside
+13.7%
vs. current price
Analyst Count
—
covering this stock
Price Range
$147 - $200
Analyst target range
Yum! Brands is covered by 21 analysts, with a consensus recommendation of 'Buy' and a mean recommendation score of 2.23 (where 1 is Strong Buy and 5 is Sell). The average target price is $174.33, implying approximately 17.1% upside from the current price of $148.92. The distribution leans bullish, with recent actions including upgrades from Morgan Stanley (Overweight from Equal Weight) and maintained Buy ratings from TD Cowen, while Citigroup and Wells Fargo hold Neutral/Equal Weight stances. The target range spans from a low of $147.00 to a high of $200.00, representing a spread of 36%. The high target of $200 assumes successful execution of the Pizza Hut sale, accelerated growth at KFC and Taco Bell, and multiple expansion as the market rewards the streamlined portfolio. The low target of $147 suggests downside risk from consumer spending weakness, integration challenges, or failure to realize cost synergies. The wide spread indicates significant uncertainty around the company's transformation, but the consensus bullishness reflects confidence in the strategic pivot. The recent upgrade from Morgan Stanley and maintained Buy ratings from multiple firms suggest positive momentum in analyst sentiment, though the presence of Neutral ratings highlights lingering caution.
Bulls vs Bears: YUM Investment Factors
Yum! Brands presents a mixed picture: the Pizza Hut sale streamlines the portfolio toward higher-growth concepts, and strong free cash flow supports shareholder returns. However, decelerating revenue growth and a premium valuation relative to history temper enthusiasm. The bull case rests on successful execution of the strategic pivot and margin expansion, while the bear case centers on consumer spending headwinds and valuation risk. Currently, the evidence slightly favors the bulls given the analyst consensus and defensive business model, but the key tension is whether the Pizza Hut sale will unlock sufficient growth to justify the current multiple.
Bullish
- Streamlined Portfolio via Pizza Hut Sale: The $2.3 billion sale of Pizza Hut allows Yum to focus on higher-growth KFC and Taco Bell, which generated $1.676 billion in Q1 2026 revenue combined (81% of total). This strategic pivot is expected to improve margins and growth trajectory.
- Strong Free Cash Flow Generation: Trailing twelve-month free cash flow stands at $1.649 billion, providing ample capacity for dividends ($207M in Q1) and buybacks ($185M in Q1). The FCF yield of ~3.9% supports shareholder returns.
- Expanding Profit Margins: Net margin improved to 21.0% in Q1 2026 from 14.2% a year earlier, driven by operating leverage. Operating margin expanded to 31.3% from 30.7%, reflecting cost discipline and a high-margin franchise model.
- Analyst Consensus Buy with 17% Upside: 21 analysts rate Yum a Buy with an average target of $174.33, implying 17.1% upside from $148.92. Recent upgrades from Morgan Stanley (Overweight) and maintained Buy ratings from TD Cowen signal positive sentiment.
Bearish
- Decelerating Revenue Growth: Q1 2026 revenue grew 15.2% YoY, down from 17.9% in Q4 2025. The multi-quarter trend shows growth slowing from 17.9% to 15.2%, indicating potential headwinds from consumer spending shifts and rising gas prices.
- Premium Valuation vs. History: Trailing P/E of 27.1x is above the 5-year average of ~24x, implying the market expects above-average earnings growth. If growth disappoints, multiple compression could pressure the stock.
- Negative Equity from Aggressive Buybacks: Debt-to-equity of -1.63 reflects negative equity due to extensive share repurchases. While common for mature franchisors, it leaves limited balance sheet flexibility and increases financial risk if earnings decline.
- Underperformance vs. S&P 500: Yum has underperformed the S&P 500 by 14.35% over the past year, with a 1-year return of +2.12% vs. SPY's +16.47%. Relative weakness suggests persistent market skepticism about growth prospects.
YUM Technical Analysis
Yum! Brands is in a range-bound consolidation phase, with the stock trading at $148.92 as of July 24, 2026, representing a 1-year price change of +2.12% and sitting at 42.3% of its 52-week range ($137.33 low to $170.14 high). This positioning near the lower end of the range suggests the stock is closer to value territory than overextended highs, but the lack of a clear uptrend indicates market indecision. The stock has underperformed the S&P 500 significantly, with a relative strength of -14.35% over the past year versus the SPY's +16.47% gain, highlighting persistent weakness relative to the broader market. Short-term momentum is negative, with a 1-month price change of -2.68% and a 3-month change of -7.09%, both contrasting with the positive 1-year return. This divergence signals a deceleration from the prior uptrend, potentially reflecting investor concerns over the Pizza Hut sale and consumer headwinds. The stock's beta of 0.56 indicates it is 44% less volatile than the market, which may appeal to risk-averse investors but also limits upside participation in rallies. Key support lies at the 52-week low of $137.33, a break below which could trigger further downside toward $130, while resistance is at the 52-week high of $170.14. A breakout above $170 would signal a resumption of the long-term uptrend, but the current price action suggests the stock is more likely to test support given the negative momentum and relative weakness.
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% | +0.2% |
| 3m | -3.2% | +3.7% |
| 6m | -1.4% | +8.0% |
| 1y | +6.3% | +18.2% |
| ytd | +1.9% | +9.6% |
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YUM Fundamental Analysis
Revenue growth has been solid but decelerating, with Q1 2026 revenue of $2.059 billion growing 15.2% year-over-year, though this compares to a 17.9% growth rate in Q4 2025. The multi-quarter trend shows revenue rising from $1.763 billion in Q2 2024 to $2.059 billion in Q1 2026, but the pace of acceleration has moderated. Segment data reveals KFC ($879 million) and Taco Bell ($797 million) are the primary growth drivers, while Pizza Hut ($253 million) and Habit Burger ($130 million) are smaller contributors, with the Pizza Hut sale expected to reshape the revenue mix. The growth trajectory supports the investment case for a streamlined, higher-margin portfolio, but near-term headwinds from consumer spending shifts could pressure same-store sales. Profitability is robust, with net income of $432 million in Q1 2026 and a net margin of 21.0%, up from 14.2% in Q1 2025, reflecting operating leverage. Gross margin of 44.7% is stable compared to 46.8% a year earlier, while operating margin expanded to 31.3% from 30.7%, indicating cost discipline. The company is solidly profitable, with trailing twelve-month free cash flow of $1.649 billion, providing ample capacity for dividends and share repurchases. The balance sheet shows a debt-to-equity ratio of -1.63 (negative equity due to share buybacks), which is common for mature franchisors, but the current ratio of 1.35 indicates adequate liquidity. Free cash flow generation is strong, with a FCF yield of approximately 3.9% based on the current market cap, and the company returned $207 million in dividends and $185 million in buybacks in Q1 2026, underscoring a shareholder-friendly capital allocation policy.
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 of $432 million, the primary valuation metric is the P/E ratio. The trailing P/E stands at 27.1x, while the forward P/E is 19.95x, based on estimated EPS of $10.73. The significant gap between trailing and forward P/E implies the market expects earnings growth of roughly 36% over the next year, reflecting optimism around the Pizza Hut sale and margin expansion. Compared to the industry average (not provided, but typically around 22x for restaurants), Yum's trailing P/E of 27.1x suggests a premium of about 23%, which may be justified by its asset-light franchise model, high margins, and strong free cash flow generation. However, the forward P/E of 19.95x is more in line with the sector, indicating that the market is pricing in the anticipated earnings boost. Historically, Yum's trailing P/E has ranged from 17.2x (Q3 2021) to 43.7x (Q1 2025), with the current 27.1x near the middle of this band. This suggests the stock is not at extreme valuation levels, but the historical low of 17.2x indicates potential downside if growth disappoints. The current P/E is above the 5-year average of roughly 24x, implying the market is pricing in above-average growth expectations that must be delivered to sustain the multiple.
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 & Operational Risks: Yum's negative equity of -1.63 debt-to-equity, driven by aggressive share buybacks, limits balance sheet flexibility. While free cash flow of $1.649 billion is robust, the company carries significant debt with interest expense of $128 million in Q1 2026. Revenue concentration in KFC and Taco Bell (81% of Q1 revenue) exposes the company to brand-specific risks, and the Pizza Hut sale introduces execution risk during the transition. Margin expansion is positive, but gross margin dipped to 44.7% from 46.8% a year ago, indicating cost pressures.
Market & Competitive Risks: Yum's trailing P/E of 27.1x is above its 5-year average of ~24x, making it vulnerable to multiple compression if growth disappoints. The stock's beta of 0.56 provides downside protection but also limits upside participation in rallies. Competitive threats from Domino's and other QSR chains are intensifying, as evidenced by Domino's stock hitting a 52-week low amid CEO change and slowing sales. Macro headwinds from rising gas prices ($4/gallon) could pressure consumer spending on dining out, though value-focused QSR may benefit from trade-down behavior.
Worst-Case Scenario: A prolonged consumer spending downturn combined with execution missteps in the Pizza Hut sale could lead to earnings misses and analyst downgrades. The stock could retest its 52-week low of $137.33, representing a -7.8% decline from current levels. In a severe recession scenario, the stock could fall to $130, a -12.7% loss, based on historical max drawdown of -12.83%. The realistic downside from current price is approximately -7.8% to the 52-week low of $137.33.
FAQ
The key risks are: 1) Financial: Negative equity from aggressive buybacks (debt-to-equity -1.63) limits balance sheet flexibility. 2) Competitive: Intense competition from Domino's and other QSR chains could pressure market share. 3) Macro: Rising gas prices ($4/gallon) may reduce consumer spending on dining out, though value-focused QSR could benefit. 4) Company-specific: Execution risk from the Pizza Hut sale and potential delays. The most severe risk is a prolonged consumer downturn, which could drive the stock to $137.33 (52-week low) or lower.
The 12-month forecast includes three scenarios: Bull case (25% probability) targets $170-$200, driven by successful Pizza Hut sale and strong KFC/Taco Bell growth. Base case (50% probability) targets $148-$174, assuming moderate growth and stable margins. Bear case (25% probability) targets $130-$147, if consumer spending weakens and the sale faces delays. The most likely scenario is the base case, with the stock trading near the analyst average target of $174.33, implying 17.1% upside from current levels.
Yum's trailing P/E of 27.1x is above its 5-year average of ~24x, suggesting a slight premium. However, the forward P/E of 19.95x is in line with the restaurant sector average of ~22x, indicating the market is pricing in expected earnings growth of roughly 36% next year. Compared to peers, Yum's asset-light model and high margins (21% net margin) justify a premium. The PEG ratio of 4.61x suggests the stock is priced for high growth, which may be optimistic. Overall, Yum appears fairly valued on a forward basis but slightly overvalued historically.
Yum! Brands offers a compelling risk/reward for long-term investors, with a 17.1% upside to the analyst average target of $174.33. The stock's forward P/E of 19.95x is reasonable, but the trailing P/E of 27.1x suggests the market expects strong earnings growth. The biggest downside risk is a consumer spending downturn that could pressure same-store sales, potentially sending the stock to its 52-week low of $137.33. For investors seeking stable income and moderate growth, Yum is a good buy at current levels, but those with a shorter time horizon may want to wait for a pullback to $140 or confirmation of the Pizza Hut sale's benefits.
Yum is best suited for long-term investment due to its stable franchise model, strong cash flows, and dividend yield of 1.88%. With a beta of 0.56, it offers lower volatility, making it less ideal for short-term trading. The stock's range-bound price action and negative short-term momentum (-2.68% 1-month) suggest limited near-term upside. A minimum holding period of 3-5 years is recommended to benefit from the Pizza Hut sale's strategic benefits and compounding shareholder returns.