Yum! Brands
YUM
$150.16
+0.41%
Yum! Brands operates as the world's second-largest restaurant company by systemwide sales, generating over $68 billion annually across more than 63,000 restaurants in 155 markets through its KFC, Taco Bell, Pizza Hut, and Habit Burger Grill banners, with roughly 72% of locations outside the United States. Its identity is that of an asset-light franchising platform rather than an operator — approximately 97% of units are franchised, so roughly 64% of revenue arrives as recurring royalty and marketing contributions, producing high margins and low capital intensity. The investor narrative is currently dominated by portfolio reshaping: the announced sale of the Pizza Hut brand (with Yum China separately acquiring Pizza Hut rights in China) is being read as a balance-sheet-strengthening, focus-narrowing move that leaves KFC and Taco Bell as the growth engines. Debate centers on whether a leaner, more franchised Yum can reaccelerate systemwide sales growth in a soft consumer environment, and whether the recent loss of the KFC beverage contract to Coca-Cola from PepsiCo signals anything beyond symbolism for its largest division.…
YUM
Yum! Brands
$150.16
Related headlines
Investment Opinion: Should I buy YUM Today?
The synthesized recommendation is a Hold with a positive bias. The core thesis is that Yum offers a stable, cash-generative franchising model with a catalyst in the Pizza Hut divestiture, but the current valuation already reflects much of the optimism. The analyst consensus is 'buy' with an average target of $170.15, implying 13.7% upside, but the wide target range ($147–$200) and the recent downgrade by Argus to Hold suggest caution. Supporting evidence includes the 12.27% revenue growth in Q2 2026, a 30.8% operating margin, $1.679 billion in TTM free cash flow, and a 50.6% payout ratio that comfortably covers the 1.88% dividend yield. However, the 27.06x trailing PE and 4.61 PEG ratio indicate a premium valuation relative to the restaurant sector, leaving limited margin for error. The biggest risks are a consumer slowdown that pressures systemwide sales, valuation compression if growth decelerates, and execution risk on the Pizza Hut divestiture. The rating would upgrade to Buy if the stock pulls back to the $135–$140 support zone (near the 52-week low) or if revenue growth accelerates above 15% with margin expansion. It would downgrade to Sell if revenue growth falls below 8% or if the Pizza Hut sale is executed at a dilutive valuation. Overall, the stock appears fairly valued to slightly overvalued relative to its history and peers, with a balanced risk/reward at current levels.
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YUM 12-Month Price Forecast
The forward-looking view is balanced. On the positive side, revenue growth is reaccelerating, free cash flow is strong, and the Pizza Hut divestiture provides a clear catalyst for value creation. However, the stock's premium valuation (27.06x trailing PE, 4.61 PEG) already prices in much of this optimism, and the wide analyst target range ($147-$200) reflects uncertainty. The low beta and stable margins offer defensive qualities, but relative strength has lagged. I would upgrade to bullish if the stock pulls back to the $135-$140 support zone or if revenue growth accelerates above 15% with margin expansion. I would downgrade to bearish if revenue growth decelerates below 8% or if the Pizza Hut sale is executed at a dilutive valuation.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $170.61 and implied upside of +13.6% versus the current price.
Average Target
$170.61
0 analysts
Implied Upside
+13.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$147 - $200
Analyst target range
Coverage is deep, with 22 analysts and a consensus recommendation of "buy" (mean rating 2.15 on a scale where lower is more bullish), and an average target price of $170.15 implying roughly +13.7% upside from the $149.70 current price. The consensus leans moderately bullish rather than aggressively so: the average target sits almost exactly at the $170.14 52-week high, meaning the Street's base case is a full recovery to the July peak rather than a breakout to new highs. Estimates are constructive, with average forward EPS of $10.65 (range $10.17–$11.63) and average revenue of $11.26 billion (range $10.86–$12.05 billion), implying analysts expect the Pizza Hut divestiture to be managed without derailing the top line. The target range of $147.00 to $200.00 is wide — a $53 spread, or roughly 35% of the current price — which signals genuine disagreement about the post-divestiture earnings power and the consumer backdrop. The $200 high case likely assumes multiple expansion toward the upper end of Yum's historical PE band plus accelerating KFC and Taco Bell unit growth and successful redeployment of Pizza Hut sale proceeds; the $147 low case, essentially at today's price, prices in margin compression, consumer trade-down pressure, and a value-destructive or dilutive disposal. Institutional flow is mixed but tilting positive: Morgan Stanley upgraded to Overweight from Equal Weight (June 3), Wells Fargo upgraded to Overweight from Equal Weight (September 10), and JP Morgan and Baird reiterated Overweight/Outperform, while Argus downgraded to Hold from Buy on September 24 and RBC, Citigroup, and TD Cowen stayed at neutral-to-constructive ratings — a pattern of net upgrades offset by one notable downgrade, consistent with the moderate "buy" consensus and the wide target dispersion.
Bulls vs Bears: YUM Investment Factors
The bull case rests on reaccelerating revenue growth (12.27% YoY), robust free cash flow ($1.679 billion TTM), and a clear catalyst in the Pizza Hut divestiture that sharpens focus on KFC and Taco Bell. The bear case centers on a premium valuation (27.06x trailing PE, 4.61 PEG) that leaves little margin for error, negative equity from past leverage, and consumer weakness that could pressure systemwide sales. Currently, the bull evidence appears slightly stronger given the growth acceleration and cash flow strength, but the valuation premium is a significant counterweight. The single most important tension is whether the 12.27% revenue growth rate is sustainable post-divestiture; if it decelerates toward the low single digits typical of mature franchisors, the premium multiple would likely compress. Conversely, if growth holds and the Pizza Hut sale proceeds are redeployed accretively, the stock could re-rate toward the analyst high target of $200.
Bullish
- Revenue reaccelerating at 12.27% YoY: Q2 2026 revenue of $2.169 billion grew 12.27% year-over-year, a sharp step-up from the prior four-quarter cadence that ranged from $1.787 billion to $2.514 billion. This growth is well ahead of what a 97%-franchised model typically delivers organically, suggesting unit growth, royalty capture, and pricing are all contributing.
- Free cash flow comfortably covers dividends and buybacks: TTM free cash flow of $1.679 billion easily covers $206 million of quarterly dividends and $489 million of Q2 buybacks, while still allowing $369 million of debt repayment in Q2. The 4.0% FCF yield and 50.6% payout ratio indicate the dividend is well covered and the balance sheet has deleveraging capacity.
- Analyst consensus buy with 13.7% upside: 22 analysts rate the stock a buy (mean rating 2.15) with an average target price of $170.15, implying 13.7% upside from the current $149.70. The average target sits almost exactly at the 52-week high of $170.14, reflecting a base case of full recovery to the July peak.
- Pizza Hut divestiture sharpens focus on growth engines: The pending sale of Pizza Hut removes the weakest large segment ($254 million quarterly revenue vs. KFC's $924 million and Taco Bell's $853 million) and strengthens the balance sheet. This leaves KFC and Taco Bell, which together contribute 82% of revenue, as the clear growth engines.
Bearish
- Premium valuation leaves little room for disappointment: At 27.06x trailing earnings and 21.83x forward, Yum trades at the upper end of the restaurant sector's typical high-teens-to-low-20s PE band. The 4.61 PEG ratio signals the market is paying a steep price relative to expected growth, which is only defensible if the 12.27% revenue growth rate proves durable.
- Negative equity and high leverage distort financials: Negative book value (ROE of -21.28%, debt-to-equity of -1.63, P/B of -5.74) is a legacy of buybacks and leverage, not distress, but it complicates equity-based leverage metrics. Interest coverage of about 5.1x is adequate but not strong, and the negative equity limits financial flexibility.
- Consumer weakness could pressure systemwide sales: The investment debate centers on whether a leaner Yum can reaccelerate systemwide sales growth in a soft consumer environment. Recent news highlights a challenging consumer backdrop, and any slowdown in global systemwide sales would directly hit royalty revenue and the premium valuation.
- Wide analyst target dispersion signals uncertainty: The target range of $147 to $200 represents a $53 spread, or roughly 35% of the current price, indicating genuine disagreement about post-divestiture earnings power. The low target of $147 is essentially at today's price, pricing in margin compression and consumer trade-down pressure.
YUM Technical Analysis
Yum is in a range-bound consolidation phase with a mildly positive tilt: the stock is up 2.28% over the past year and 0.52% over three months, but down 6.60% over six months and 0.53% year-to-date, meaning the trailing-year gain was largely earned in the first half and has since been given back. At $149.70, the shares sit at roughly 43% of the 52-week range of $134.26–$170.14 — closer to the low than the high, which frames the stock as neither a momentum leader nor a distressed falling knife, but a consolidating name digesting a mid-year breakdown. The 52-week high of $170.14 was set in early July, and the subsequent 19.27% max drawdown to the September low near $135.75 defines the correction the stock is now attempting to recover from. Short-term momentum has turned constructive: the stock is up 6.45% over the past month versus a 1.02% decline for SPY, a 7.47-point relative-strength outperformance, and the October sequence of higher lows ($136.12 on October 2 to $149.70 on October 23) confirms buyers defending the $136–$140 zone. That one-month strength diverges sharply from the negative six-month (-6.60%) and one-year relative-strength (-10.85 points versus SPY's +13.13%), a classic mean-reversion bounce within a longer consolidation rather than a confirmed trend reversal — the October 23 session alone gave back 3.08% from the prior close of $154.45, showing the rally is not yet one-way. Key resistance sits at the $154–$157 cluster (the late-July and late-August highs) and then the $170.14 52-week high; a decisive break above $157 would target the July peak and signal the correction is over, while a loss of the $136 support shelf would reopen the 52-week low at $134.26 and likely trigger momentum selling. With a beta of just 0.546, Yum is roughly 45% less volatile than the S&P 500, which supports larger position sizing for volatility-targeted portfolios but also means the stock will lag in broad risk-on rallies — consistent with its 10.85-point one-year relative-strength shortfall — and the 5.51 short ratio suggests short sellers are not aggressively pressing the name.
Beta
0.55
0.55x market volatility
Max Drawdown
-19.3%
Largest decline past year
52-Week Range
$134-$170
Price range past year
Annual Return
+6.4%
Cumulative gain past year
| Period | YUM Return | S&P 500 |
|---|---|---|
| 1m | +8.6% | +0.9% |
| 3m | -4.4% | +4.1% |
| 6m | -5.2% | +7.2% |
| 1y | +6.4% | +12.4% |
| ytd | -0.2% | +13.3% |
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YUM Fundamental Analysis
Revenue is reaccelerating at the top line: Q2 2026 revenue of $2.169 billion grew 12.27% year-over-year versus $1.932 billion in Q2 2025, a marked step-up from the prior four-quarter cadence of $1.787 billion (Q1 2025), $1.932 billion, $1.980 billion (Q3 2025), and $2.514 billion (Q4 2025), which implies a sequential build from $2.059 billion in Q1 2026. Segment data show KFC Global at $924 million and Taco Bell Global at $853 million as the twin growth engines, together contributing roughly 82% of the $2.17 billion quarterly total, while Pizza Hut Global at $254 million and Habit Burger at $139 million are the smaller, slower contributors — and the pending Pizza Hut divestiture would remove the weakest large segment while concentrating the story on KFC and Taco Bell. The 12.27% growth rate is well ahead of what a 97%-franchised model typically delivers organically, suggesting a mix of unit growth, royalty capture, and pricing, and it supports the case that the portfolio simplification is not masking a stalling core. Profitability is robust: Q2 2026 net income of $853 million on a 39.3% net margin, gross margin of 47.26%, and operating margin of 30.80% reflect the royalty-heavy model, and gross margin has held in a 44.5%–47.3% band across the last five quarters (Q2 2025: 46.84%; Q3 2025: 47.02%; Q4 2025: 44.51%; Q1 2026: 44.68%; Q2 2026: 47.26%), i.e., stable rather than compressing. The Q2 net margin spike was flattered by a $320 million tax benefit (negative income tax expense) that lifted net income above operating income of $655 million, so the underlying operating margin of 30.2% is the cleaner read — still comfortably above typical restaurant-industry levels and consistent with the 30.80% trailing operating margin in the valuation data. Balance-sheet optics are distorted by negative equity (ROE of -21.28%, debt-to-equity of -1.63, P/B of -5.74), a legacy of buybacks and leverage rather than distress, and liquidity is adequate with a current ratio of 1.35 and $674 million of cash at Q2-end. Free cash flow is the real story: $1.679 billion TTM, with quarterly FCF of $407 million in Q2 2026, $341 million in Q1 2026, $482 million in Q4 2025, and $449 million in Q3 2025, comfortably covering $206 million of quarterly dividends and $489 million of Q2 buybacks, while debt repayment of $369 million in Q2 shows deleveraging capacity. The FCF yield of roughly 4.0% on the $42.06 billion market cap and a 50.6% payout ratio indicate the dividend is well covered, though the negative book value means equity-based leverage metrics should be read through interest coverage (about 5.1x) rather than D/E.
Quarterly Revenue
$2.2B
2026-06
Revenue YoY Growth
+12.3%
YoY Comparison
Gross Margin
47.3%
Latest Quarter
Free Cash Flow
$1.7B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is YUM Overvalued?
Because Yum is profitable (Q2 2026 net income of $853 million; trailing EPS positive), the PE ratio is the primary metric: the stock trades at 27.06x trailing earnings versus 21.83x forward, a 19.3% compression that implies the market expects meaningful EPS growth — consistent with the $10.65 consensus forward EPS estimate against a trailing base that has been depressed by one-off items. The gap between trailing and forward multiples is the key valuation signal: investors are paying today for earnings that have not yet materialized, so execution on the Pizza Hut divestiture and KFC/Taco Bell unit growth must validate the forward number. On the secondary metrics, the 5.12x PS and 6.14x EV/Sales look rich in isolation, but the 19.14x EV/EBITDA is the more appropriate cross-check for a capital-light franchisor and sits at a premium that the 30.8% operating margin and 46.2% gross margin help justify. Peer comparison is constrained because the provided valuation dataset does not include an industry-average multiple; against the restaurant sector's typical high-teens-to-low-20s PE band, however, Yum's 27.06x trailing and 21.83x forward sit at the upper end, and the 4.61 PEG ratio signals the market is paying a steep price relative to expected growth — a premium that is defensible only if the 12.27% revenue growth rate proves durable. Historically, Yum's own PE has ranged from 12.89x (Q2 2026, tax-benefit distorted) and 19.70x (Q4 2025) up to 43.71x (Q1 2025) and 36.38x (Q2 2022), with the current 27.06x sitting in the middle-to-upper portion of that band; the PS ratio of 5.12x compares with a historical span from 15.90x (Q4 2024) to 24.79x (Q1 2024) on the quarterly series, though those figures reflect a different share-count and revenue base and should be treated cautiously. The read-through is that valuation is neither at a historical extreme nor cheap — the market is pricing in successful portfolio simplification and steady royalty growth, leaving limited margin for disappointment if consumer weakness pressures systemwide sales.
PE
27.1x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 13x~36x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
19.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are moderate but notable. The company carries negative equity (ROE of -21.28%, debt-to-equity of -1.63) due to aggressive buybacks and leverage, which limits financial flexibility and distorts traditional leverage metrics. Interest coverage of approximately 5.1x is adequate but not robust, and any decline in operating income could pressure the ability to service debt. Additionally, the Q2 2026 net margin of 39.3% was flattered by a $320 million tax benefit; the underlying operating margin of 30.2% is cleaner but still exposes the company to earnings volatility if consumer spending weakens. Revenue concentration in KFC and Taco Bell (82% of Q2 revenue) means any brand-specific issue could disproportionately impact results. Market and competitive risks include valuation compression if growth slows. At 27.06x trailing earnings and 21.83x forward, Yum trades at a premium to the restaurant sector's typical high-teens-to-low-20s PE band, and the 4.61 PEG ratio suggests the market expects significant growth. If revenue growth decelerates below 10%, the multiple could contract toward the sector average, implying downside. The low beta of 0.546 means the stock will lag in broad risk-on rallies, as evidenced by a 10.85-point one-year relative-strength shortfall versus SPY. Competitive pressures from Domino's and Chipotle, as highlighted in recent news, could also impact market share. The worst-case scenario involves a consumer-led recession that pressures systemwide sales, causing revenue growth to stall and margins to compress. In this scenario, the stock could retest its 52-week low of $134.26, representing a 10.3% decline from the current $149.70. If the Pizza Hut divestiture is executed at a dilutive valuation or proceeds are used poorly, the stock could fall further toward the analyst low target of $147, which is only 1.8% below current levels, but a more severe outcome could see a drop to the September low of $135.75, a 9.3% decline. The max drawdown of 19.27% from the July high illustrates the potential for sharp corrections.
FAQ
The key risks include: 1) Consumer slowdown risk: a weakening consumer environment could pressure systemwide sales and royalty revenue, as the company is sensitive to restaurant traffic. 2) Valuation compression risk: the premium multiple (27.06x trailing PE) could contract if growth decelerates, especially given the 4.61 PEG ratio. 3) Execution risk on the Pizza Hut divestiture: a delay or dilutive sale could hurt sentiment and financials. 4) Financial leverage: negative equity (ROE -21.28%) and debt-to-equity of -1.63 limit flexibility, though interest coverage of 5.1x is adequate. The most severe risk is a consumer-led recession that could push the stock to the 52-week low of $134.26, a 10.3% decline.
Our 12-month forecast has three scenarios: Bull case (25% probability) targets $185-$200, assuming successful Pizza Hut divestiture and accelerating KFC/Taco Bell growth. Base case (55% probability) targets $165-$175, aligning with the analyst average of $170.15, assuming steady execution and stable margins. Bear case (20% probability) targets $134-$147, assuming a consumer slowdown and margin compression. The base case is most likely, with the key assumption that revenue growth moderates to high single digits and the Pizza Hut sale closes without disruption. The wide analyst target range ($147-$200) reflects uncertainty, but the consensus buy rating and 13.7% upside to the average target suggest a positive bias.
YUM appears fairly valued to slightly overvalued. The trailing PE of 27.06x and forward PE of 21.83x are at the upper end of the restaurant sector's typical high-teens-to-low-20s range, and the PEG ratio of 4.61 indicates the market is paying a steep price relative to expected growth. The EV/EBITDA of 19.14x is also a premium, justified only by the 30.8% operating margin. Compared to its own history, the current PE sits in the middle-to-upper portion of its range (from 12.89x to 43.71x). The market is pricing in successful portfolio simplification and steady royalty growth, leaving little room for disappointment.
YUM presents a balanced risk/reward at current levels. The stock trades at $149.70, with a consensus analyst target of $170.15 implying 13.7% upside, and the company generates strong free cash flow of $1.679 billion TTM. However, the premium valuation (27.06x trailing PE, 4.61 PEG) and the wide target range ($147-$200) suggest limited margin for error. The biggest downside risk is a consumer slowdown that could push the stock toward the 52-week low of $134.26, a 10.3% decline. For long-term investors with a moderate risk tolerance, YUM could be a good buy on pullbacks to the $135-$140 support zone, but at current levels, a Hold rating is more appropriate.
YUM is more suitable for long-term investment. The company's stable royalty stream, low beta (0.546), and consistent dividend (1.88% yield) make it a defensive holding for income and moderate growth. The pending Pizza Hut divestiture and international expansion provide long-term catalysts, but near-term volatility (max drawdown of 19.27% in the past year) and premium valuation suggest short-term trading carries higher risk. Earnings visibility is moderate, with analysts estimating EPS of $10.65 for the next year. A suggested minimum holding period is 2-3 years to allow the portfolio simplification to play out and to benefit from compounding royalty revenue.