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On Tuesday, CFRA analyst Alex Fasciano increased the price target on Yum! Brands (NYSE:YUM) shares to $153.00 from the previous target of $145.00, while reaffirming a Buy rating on the stock. Currently trading at a P/E ratio of 24.27x with a market capitalization of $36.67 billion, the stock appears slightly overvalued according to InvestingPro’s Fair Value model. The adjustment comes ahead of the company’s scheduled fourth-quarter earnings report, due in just one day.
Fasciano’s revised 12-month price target of $153.00 is based on a 25 times multiple of the firm’s projected earnings per share (EPS) of $6.11 for the year 2025, which is a slight decrease from the prior estimate of $6.21. This valuation is consistent with Yum! Brands’ five-year average. The analyst anticipates the company will achieve sales of $8,048 million in 2025, marking a 9.3% year-over-year increase and surpassing the consensus by $10 million. This projected growth significantly exceeds the company’s current revenue growth rate of 2.32%. This growth is expected to be fueled by robust same-store sales performance at Taco Bell and sequential improvements at KFC and Pizza Hut throughout the second half of 2025. Want deeper insights? InvestingPro subscribers have access to comprehensive analysis and 8 additional ProTips about Yum! Brands’ financial health and growth prospects.
Despite the forecast for stronger top-line growth, CFRA projects a contraction of 50 basis points in adjusted operating margins to 37.2% for the year 2025. The company currently maintains a healthy gross profit margin of 48.57%, while Yum! Brands’ operational efficiency is noted, with general and administrative expenses accounting for 13.7% of sales in the third quarter of 2025, which suggests limited potential for near-term margin expansion. Additionally, the analyst points out that Yum! Brands’ profits may encounter challenges due to a stronger U.S. dollar, which could dampen the improvement in international divisions of KFC and Pizza Hut. Furthermore, uncertainties surrounding foreign policy and tariffs are considered to increase risks.
In conclusion, despite these potential headwinds, CFRA believes that Yum! Brands’ capacity to grow systemwide sales by 7% annually is not fully recognized by the market, and that the current bottom-line expectations for the company may be too conservative. InvestingPro data reveals that while 11 analysts have revised their earnings downward for the upcoming period, the stock has historically demonstrated low price volatility, making it an interesting watch ahead of earnings.
In other recent news, Yum! Brands has seen notable changes and projections from various analyst firms. TD Cowen has revised the stock price target for Yum! Brands to $140, maintaining a Hold rating. Andrew Charles, an analyst at TD Cowen, cited weaker sales in emerging markets and a complex development narrative as reasons for the revised valuation.
Simultaneously, Morgan Stanley (NYSE:MS) downgraded Yum! Brands stock from Overweight to Equalweight, reducing the price target to $140. The firm highlighted four areas of concern, including mixed results of international exposure and limited potential for further cost-cutting.
On the leadership front, Yum! Brands announced a significant reshuffle at the KFC division. Sabir Sami, the CEO of the KFC Division, will step down effective March 1, 2025, with Scott Mezvinsky, currently the President of Taco Bell North America and International, set to succeed him.
Evercore ISI reaffirmed its In Line rating and a $145.00 price target for Yum! Brands, highlighting Taco Bell as a key growth driver. The firm’s analysts anticipate continued success for Taco Bell in 2025, backed by new menu items and robust year-end performance. They also suggested potential upside for Pizza Hut’s first-quarter sales against the market consensus of flat growth.
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