Yum! Brands
YUM
$149.51
-0.80%
Yum! Brands, Inc. is a global quick-service restaurant company that operates and franchises a portfolio of iconic brands, including KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill, with over 63,000 restaurants across 155 markets. As the world's second-largest restaurant firm by systemwide sales, Yum! distinguishes itself through a heavily franchised, asset-light model where 97% of locations are franchise-owned, generating recurring royalty and marketing revenue. The current investor narrative centers on the strategic divestiture of Pizza Hut, announced in June 2026, which is expected to streamline the portfolio and sharpen focus on higher-growth KFC and Taco Bell brands, while also raising questions about near-term revenue disruption and the company's ability to navigate a challenging consumer spending environment.…
YUM
Yum! Brands
$149.51
Related headlines
Investment Opinion: Should I buy YUM Today?
Rating: Hold. Yum! Brands is a high-quality franchise operator with strong margins and a strategic refocus, but the current valuation and market underperformance warrant caution. The consensus 'Buy' rating and average target of $173.34 suggest upside, yet the stock's 1-year relative strength of -13.75% indicates persistent selling pressure. Supporting evidence includes Q1 revenue growth of 15.2%, operating margin of 31.3%, and a forward P/E of 20.2x, which is near the industry average. However, the PEG ratio of 4.6 and trailing P/E premium of 23% over peers limit near-term upside. The biggest risks are a prolonged consumer slowdown and integration/execution issues post-divestiture. This Hold would upgrade to Buy if the stock pulls back to below $140 (near 52-week low) or if forward P/E drops below 18x, or if revenue growth accelerates above 15% consistently. Conversely, a downgrade to Sell would occur if the Pizza Hut sale proceeds are not used accretively or if same-store sales turn negative. Overall, YUM is fairly valued relative to its growth prospects, but not a compelling bargain at current levels.
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YUM 12-Month Price Forecast
The AI assessment is neutral with medium confidence. Yum's strong operational metrics are offset by valuation and market underperformance. The divestiture is a wildcard that could either unlock value or create short-term pain. The stock appears fairly valued, with limited upside unless the refocused strategy delivers faster growth than currently expected. An upgrade to bullish would require evidence of accelerating same-store sales and successful capital deployment, while a downgrade to bearish would be triggered by a deteriorating consumer environment or execution missteps.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $173.34 and implied upside of +15.9% versus the current price.
Average Target
$173.34
0 analysts
Implied Upside
+15.9%
vs. current price
Analyst Count
—
covering this stock
Price Range
$147 - $200
Analyst target range
Yum! Brands is covered by 22 analysts, with a consensus recommendation of 'Buy' and a mean rating of 2.23 (where 1 is Strong Buy and 5 is Sell). The average price target is $173.34, implying an upside of 15.0% from the current price of $150.71, while the low target of $147.00 suggests a modest downside of 2.5%. The high target of $200.00 represents a 32.7% upside, reflecting optimism about the Pizza Hut divestiture and focus on core brands. Recent ratings actions have been mixed, with Morgan Stanley upgrading to Overweight in June 2026, while Citigroup maintained Neutral, indicating some divergence in views on the company's strategic direction and growth prospects.
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Bulls vs Bears: YUM Investment Factors
Yum! Brands presents a mixed picture: strong operational execution with 15.2% revenue growth and high margins, but offset by a premium valuation and significant underperformance relative to the market. The Pizza Hut divestiture is a strategic positive that could unlock value, yet it introduces near-term revenue disruption. Currently, the bear case has slightly stronger evidence given the stock's lagging performance and high PEG ratio, but the bull case hinges on successful execution of the refocused strategy. The most critical tension is whether the divestiture and focus on KFC/Taco Bell can accelerate earnings growth enough to justify the current valuation, or if the company will continue to underperform in a competitive and challenging consumer environment.
Bullish
- Strong Q1 Revenue Growth: Q1 2026 revenue grew 15.2% YoY to $2.059B, driven by KFC and Taco Bell strength. This robust top-line growth demonstrates the resilience of the core brands and supports the post-divestiture growth narrative.
- High-Margin Franchise Model: With 97% of restaurants franchised, Yum generates recurring royalty income with minimal capital intensity. This is reflected in a 44.7% gross margin and 31.3% operating margin in Q1 2026, among the highest in the restaurant industry.
- Pizza Hut Divestiture Unlocks Value: The $2.3B sale of Pizza Hut, announced in June 2026, simplifies the portfolio and strengthens the balance sheet. Proceeds can be used for debt reduction, buybacks, or investment in higher-growth KFC and Taco Bell, potentially boosting EPS.
- Analyst Consensus: Buy with 15% Upside: 22 analysts rate YUM a Buy with an average price target of $173.34, implying 15.0% upside from the current $150.71. The high target of $200 suggests 32.7% potential, reflecting optimism about the strategic refocus.
Bearish
- Underperformance vs. S&P 500: YUM's 1-year return of +4.9% drastically lags the S&P 500's +18.65%. Relative strength over 1 year is -13.75%, indicating persistent investor preference for other large-cap stocks.
- High Valuation with PEG of 4.6: Trailing P/E of 27.1x is a 23% premium to the industry average of 22x. The PEG ratio of 4.6 suggests that growth expectations are already priced in, leaving little room for error.
- Pizza Hut Divestiture Revenue Drag: The sale of Pizza Hut will reduce future revenue, as it contributed significantly to systemwide sales. While strategically sound, the near-term revenue decline could pressure growth metrics and investor sentiment.
- Challenging Consumer Environment: Recent news highlights weak consumer spending and intense competition in the QSR space, as seen with Domino's sliding to a 52-week low. Yum's growth may be hampered if consumers trade down or reduce dining out.
YUM Technical Analysis
Yum! Brands' stock is currently in a range-bound consolidation phase, trading at $150.71 as of September 4, 2026, which is near the lower end of its 52-week range of $137.33 to $170.14, representing 88.6% of the range's midpoint. The 1-year price change of +4.9% significantly lags the S&P 500's +18.65% gain, indicating pronounced underperformance, and the stock has pulled back 13.9% from its 52-week high, suggesting a defensive posture. The price sits 9.7% above the 52-week low, which could be seen as either a potential support zone or a sign of continued weakness, depending on broader market sentiment.
Beta
0.55
0.55x market volatility
Max Drawdown
-13.9%
Largest decline past year
52-Week Range
$137-$170
Price range past year
Annual Return
+1.0%
Cumulative gain past year
| Period | YUM Return | S&P 500 |
|---|---|---|
| 1m | -0.8% | -0.9% |
| 3m | -1.0% | +5.6% |
| 6m | -5.6% | +15.0% |
| 1y | +1.0% | +18.1% |
| ytd | -0.7% | +12.3% |
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YUM Fundamental Analysis
Yum! Brands reported Q1 2026 revenue of $2.059 billion, up 15.2% year-over-year, driven by strong performance in KFC and Taco Bell, while Pizza Hut's divestiture is expected to reduce future revenue. The company's net income for Q1 2026 was $432 million, a significant increase from $253 million in Q1 2025, reflecting improved operational efficiency and lower tax expenses. Gross margin stood at 44.7% in Q1 2026, slightly down from 46.8% in the prior-year quarter, while operating margin expanded to 31.3% from 30.7%, indicating solid cost control despite revenue mix changes.
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 Yum! Brands' positive net income, the trailing P/E ratio of 27.1x is the primary valuation metric, with a forward P/E of 20.2x, implying the market expects earnings growth of approximately 34% over the next year. The stock trades at a premium to the broader market, with a PEG ratio of 4.6x, suggesting that growth expectations are already priced in. Compared to the industry average P/E of 22x (as per available data), Yum!'s trailing P/E of 27.1x represents a 23% premium, which may be justified by its strong franchise model and high margins, but the forward P/E of 20.2x is more in line with peers, indicating potential for multiple compression if growth disappoints.
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 balance sheet is highly leveraged, with a negative debt-to-equity ratio of -1.63 and negative shareholders' equity, reflecting years of buybacks and dividends. This leverage amplifies the impact of rising interest rates; Q1 2026 interest expense was $128M, up from $120M a year earlier. The company's net income is volatile, swinging from $253M in Q1 2025 to $432M in Q1 2026, partly due to tax rate changes. The Pizza Hut divestiture will reduce revenue, and the company must successfully redeploy capital to avoid EPS dilution. Additionally, with 97% of restaurants franchised, Yum is dependent on franchisee health; any widespread franchisee financial distress could reduce royalty income.
FAQ
The key risks for YUM include: 1) Financial risk from high leverage, with a negative debt-to-equity ratio of -1.63, making the company sensitive to interest rate increases. 2) Competitive risk from intense QSR competition, as seen with Domino's recent struggles, which could pressure sales. 3) Macro risk from a consumer slowdown, which would directly impact restaurant traffic and franchisee sales. 4) Company-specific risk from the Pizza Hut divestiture, which could face execution issues or result in lower-than-expected proceeds. The most severe risk is a combination of these factors, which could drive the stock down to its 52-week low of $137.33, a potential 9% loss from the current price.
Based on analyst targets and scenario analysis, YUM's 12-month forecast is as follows: In the bull case (25% probability), the stock could reach $173-$200, driven by successful divestiture and strong growth. In the base case (50% probability), the stock is expected to trade around $160-$175, aligning with the average analyst target of $173.34. In the bear case (25% probability), the stock could fall to $137-$147, testing its 52-week low. The most likely scenario is the base case, assuming the Pizza Hut sale closes smoothly and KFC/Taco Bell continue to grow at a moderate pace. Investors should monitor quarterly earnings for guidance on revenue and margins post-divestiture.
YUM is trading at a trailing P/E of 27.1x, which is 23% above the industry average of 22x, indicating a premium valuation. However, its forward P/E of 20.2x is more in line with peers, suggesting the market expects earnings growth of about 34% over the next year. The PEG ratio of 4.6, however, implies that this growth is already priced in, leaving little margin of safety. Compared to its own history, the stock is near the lower end of its 52-week range, but the valuation metrics suggest it is not cheap. The market is pricing in successful execution of the Pizza Hut divestiture and continued growth from KFC and Taco Bell. If these expectations are met, the stock is fairly valued; if not, it could be overvalued.
YUM offers a balanced risk/reward profile. With a consensus 'Buy' rating and an average price target of $173.34, analysts see 15% upside from the current price of $150.71. The stock's low beta (0.55) and 1.88% dividend yield provide defensive characteristics, but its trailing P/E of 27.1x is a 23% premium to the industry average, and the PEG ratio of 4.6 suggests growth is fully priced. The biggest downside risk is a prolonged consumer slowdown, which could push the stock toward its 52-week low of $137.33, a 9% drop. For long-term investors with a horizon of 3-5 years, YUM could be a good buy if the Pizza Hut divestiture leads to improved growth and margin expansion. However, value-conscious investors may want to wait for a better entry point below $140.
YUM is more suitable for long-term investment due to its defensive characteristics, including a low beta of 0.55 and a dividend yield of 1.88%. The stock's growth is moderate, with revenue growth of 15.2% in Q1 2026, but it is not a high-growth speculative stock. Short-term trading could be challenging given the stock's range-bound behavior and underperformance relative to the market. For long-term investors, a minimum holding period of 3-5 years is recommended to allow the Pizza Hut divestiture to play out and for the refocused strategy to drive earnings growth. The stock's low volatility and steady dividend make it a good candidate for a core portfolio holding, but investors should be prepared for periods of underperformance, as seen over the past year.