YUM

Yum! Brands Posts Solid First-Quarter Results; China Growth Strong, US Performance Improving

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Yum! Brands () issued strong first-quarter results after the close Wednesday that showed improving domestic performance but cost pressures in its fastest-growing markets. We still believe Yum! Brands is the best way to play restaurant expansion in emerging markets (namely China), but the firm’s shares already reflect this opportunity, in our opinion. We are sticking with our fair value estimate ($55 at the high end of our estimated range). Worldwide systems sales of the owner of Pizza Hut, Taco Bell and KFC Chains grew 7% (before currency) during the quarter, propelled largely by 28% growth in China (growth in the US was meager at just 1%). On a reported basis, total revenues advanced 13%. However, the domestic top-line performance was … Read more

Yum! Brands’ Fourth-Quarter Results Show Chinese Demand Remains Strong; Shares Still Expensive

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Yum! Brands’ (YUM) fourth-quarter results, issued after the close Monday, revealed strong performance, particularly in China. Though the firm will likely get a bid tomorrow, we believe the shares to be a bit rich and remain on the sidelines. Our fair value estimate for the world’s largest restaurant company is unchanged. Worldwide system sales grew 11% in the fourth quarter thanks to 33% growth in China. Same-store sales grew an impressive 21% in China during the fourth quarter and managed to stay positive in the US during the period. We think such performance speaks clearly about the strength of the Chinese economy/consumer, and the positive US same-store-sales growth represents an improvement over the full-year measure (and anniversaries a very strong … Read more

Yum Brands’ Results in China Superb; Performance in the US Needs Improvement

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Yum Brands (YUM) reported third-quarter results Wednesday that showed strong international expansion, especially within China, but very poor results in the US. We are maintaining our $44 fair value estimate. Total revenues jumped 14% on a similar growth rate of sales in company stores and licensing fees, though higher food and paper costs drove operating profit lower from the same period a year ago. Same-store-sales jumped nearly 20% in China (and about 3% across Yum’s international portfolio), but fell about 3% in the US (Taco Bell, KFC, and Pizza Hut each declined more than 2% domestically). Operating profit was particularly weak in the US and suffered a 16% decline. However, we’re big fans of Yum’s expansion in China, which saw … Read more

Closely Watching McDonald’s for an Entry Point

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This article appeared on Seeking Alpha. Please view disclosures: https://seekingalpha.com/article/280998-closely-watching-mcdonalds-for-an-entry-point We like McDonald’s (MCD): The Golden Arches’ future looks as bright as its past.There’s little need for us to explain to investors the story behind McDonald’s. At the end of 2011, McDonald’s will have over 33,500 restaurant locations nationwide, and total sales (including franchisees, which don’t count for McDonald’s Corp.) will likely exceed $100 billion. We think a discounted-cash flow method is the most effective way to determine the intrinsic value of a company in order to determine what investors should pay for shares. In the spirit of the transparency of our process, we make our discounted cash-flow valuation model template, which can be used to value any operating (non-financial) company, … Read more

How to Think About Corporate Tax Reform

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