Yum! Brands
YUM
$146.58
-0.63%
Yum! Brands, Inc. is a global restaurant powerhouse operating in the Quick Service Restaurant (QSR) industry through its iconic brands: KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill. It is the world's second-largest restaurant firm by systemwide sales, distinguished by a heavily franchised model where 97% of its over 63,000 locations are operated by franchisees, creating a highly asset-light business focused on royalty and marketing fee streams. The current investor narrative centers on the resilience of its franchise cash flow model amid consumer spending pressures, with recent news highlighting a potential trade-down to value-focused QSRs, while the stock's recent underperformance versus the market raises questions about its growth trajectory and the effectiveness of its brand revitalization efforts.…
YUM
Yum! Brands
$146.58
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YUM 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $190.55 and implied upside of +30.0% versus the current price.
Average Target
$190.55
6 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
6
covering this stock
Price Range
$117 - $191
Analyst target range
Analyst coverage for YUM is limited, with only 6 analysts providing estimates, indicating this large-cap stock has less widespread institutional research focus than some peers. The consensus sentiment, based on recent institutional ratings, leans neutral to slightly positive, with firms like JP Morgan and Barclays maintaining 'Overweight' ratings, Evercore ISI and TD Cowen at 'Outperform'/'Buy', while Citigroup, Wells Fargo, and Morgan Stanley hold 'Neutral' or 'Equal Weight' stances. The average target price implied by the estimated EPS of $11.16 and a forward P/E of 19.74x suggests a target near $220, which would represent significant upside of approximately 49% from the current price of $147.95, though this is a derived figure as explicit price targets are not provided in the data. The wide range between the low EPS estimate of $10.31 and the high of $11.48 signals moderate uncertainty around near-term earnings power, likely tied to macroeconomic concerns impacting consumer spending; the recent downgrade by Oppenheimer from 'Outperform' to 'Perform' in January 2026 reflects a growing cautious stance among some analysts regarding near-term performance.
Bulls vs Bears: YUM Investment Factors
The bull case is anchored in YUM's high-quality, cash-generative franchise model, strong profitability, and significant implied upside to analyst targets. The bear case highlights severe technical weakness, a premium valuation that may compress further, and high financial leverage. Currently, the bearish evidence appears stronger in the near term, given the stock's persistent underperformance and breakdown from its trading range. The single most important tension in the investment debate is whether the market will begin to reward the company's defensive cash flow characteristics and potential trade-down benefits, or if continued growth concerns and valuation compression will keep the stock under pressure.
Bullish
- Robust Franchise Cash Flow Model: The 97% franchised model generates highly predictable royalty streams, evidenced by $1.641 billion in TTM free cash flow. This asset-light structure provides strong financial resilience and supports shareholder returns, with a current payout ratio of 50.6%.
- Strong Profitability and Margins: The company maintains superior profitability with a trailing net margin of 19.0% and an operating margin of 30.8%. These metrics are well above typical restaurant industry averages, underpinned by a solid gross margin of 46.2%.
- Significant Analyst Target Upside: The implied average analyst target price is approximately $220, based on a forward P/E of 19.74x and estimated EPS of $11.16. This represents a potential 49% upside from the current price of $147.95, indicating substantial undervaluation.
- Defensive Low Beta Profile: With a beta of 0.60, YUM exhibits only 60% of the market's volatility, historically providing defensive characteristics. This could offer relative stability in a downturn, especially if consumer trade-down benefits its value-focused brands.
Bearish
- Persistent Technical Downtrend: The stock is in a clear downtrend, down 12.02% over three months and 7.44% over one month, significantly underperforming the SPY by -22.30% and -13.75% respectively. It is trading near the lower end of its 52-week range, indicating sustained selling pressure.
- Premium Valuation vs. Peers: YUM's trailing P/E of 26.98x and forward P/E of 19.74x trade at a premium to the typical restaurant industry average (often low 20s). Its elevated Price-to-Sales of 5.12x and EV/Sales of 6.34x suggest limited room for multiple expansion.
- High Financial Leverage: The company carries significant debt, with a debt-to-equity ratio of -1.63, indicating negative shareholder equity on a book basis. While typical for the franchise model, this leverage increases financial risk in a rising interest rate environment.
- Slowing Momentum and Analyst Caution: Recent momentum has turned decisively negative, with a 1-month decline accelerating the 3-month loss. This aligns with growing analyst caution, exemplified by Oppenheimer's January 2026 downgrade from 'Outperform' to 'Perform'.
YUM Technical Analysis
The stock is in a clear downtrend, having declined 12.02% over the last three months and 7.44% over the past month, significantly underperforming the broader market, as evidenced by a -22.30% and -13.75% relative strength score over those periods, respectively. Currently trading at $147.95, the price is near the lower end of its 52-week range of $137.33 to $169.39, positioning it approximately 17% above the 52-week low but 13% below the recent high, suggesting the stock is in a phase of consolidation after a sharp sell-off and may be approaching a potential support zone. Recent momentum is decisively negative, with the 1-month decline of -7.44% accelerating the 3-month loss of -12.02%, starkly contrasting with the modest 1-year gain of 2.71% and indicating a breakdown from a longer-term sideways pattern, a bearish divergence further confirmed by the stock's persistent negative relative strength against the SPY. Key technical support is clearly defined at the 52-week low of $137.33, while resistance sits near the recent highs around $169; a sustained break below support could trigger further downside, whereas reclaiming the $160 level would be necessary to signal a reversal, and with a beta of 0.60, the stock exhibits only 60% of the market's volatility, which historically provided defensive characteristics but has not shielded it from recent sector-specific selling pressure.
Beta
0.60
0.60x market volatility
Max Drawdown
-12.8%
Largest decline past year
52-Week Range
$137-$169
Price range past year
Annual Return
+1.3%
Cumulative gain past year
| Period | YUM Return | S&P 500 |
|---|---|---|
| 1m | -7.4% | +5.4% |
| 3m | -7.8% | +10.9% |
| 6m | +0.5% | +11.0% |
| 1y | +1.3% | +28.1% |
| ytd | -2.6% | +11.4% |
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YUM Fundamental Analysis
Yum's revenue trajectory shows steady but modest growth, with Q4 2025 revenue of $2.514 billion representing a 6.44% year-over-year increase, continuing a trend of positive but single-digit growth across recent quarters. The growth is primarily driven by its largest segment, KFC Global, which generated $1.041 billion in the latest period, followed by Taco Bell at $997 million, while Pizza Hut and Habit Burger contributed $303 million and $174 million, respectively, indicating the core brands are the primary growth engines. Profitability remains robust with the company posting a net income of $535 million in Q4 2025 and a trailing twelve-month net margin of 18.98%, supported by a solid gross margin of 46.17% and an operating margin of 30.80%, though these margins have shown some quarterly fluctuation, with Q4 2025 gross margin of 44.51% slightly below the full-year average. The balance sheet and cash flow picture is strong, with the company generating substantial free cash flow of $1.641 billion TTM, providing ample liquidity as evidenced by a current ratio of 1.35, but it carries significant financial leverage with a debt-to-equity ratio of -1.63 (indicating negative shareholder equity on a book value basis), though this is typical for a franchise-heavy model that returns capital to shareholders; the ROE of -21.28% is distorted by this equity structure, while the ROA of 23.30% highlights efficient use of assets.
Quarterly Revenue
$2.5B
2025-12
Revenue YoY Growth
+0.06%
YoY Comparison
Gross Margin
+0.44%
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?
With a positive net income of $535 million in the latest quarter, the primary valuation metric is the Price-to-Earnings (P/E) ratio. The stock trades at a trailing P/E of 26.98x and a forward P/E of 19.74x, with the forward multiple's discount to the trailing figure implying the market expects earnings growth. Compared to sector averages, YUM's trailing P/E of 26.98x is at a premium to the typical restaurant industry average (often in the low 20s), and its Price-to-Sales ratio of 5.12x and EV/Sales of 6.34x are also elevated, suggesting the market prices in the stability and quality of its franchise cash flows. Historically, the stock's own trailing P/E has ranged significantly, with recent quarters showing values from the high teens to over 43x; the current 26.98x sits above the lower end of that range but well below the peaks seen in early 2025, indicating valuation has compressed from optimistic levels but is not yet at deeply discounted historical lows.
PE
27.0x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 17x~44x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
19.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: YUM's primary financial risk stems from its high leverage, with a debt-to-equity ratio of -1.63, though this is structural to its franchise model. While free cash flow is robust at $1.64 billion TTM, margin pressure is a concern, as the Q4 2025 gross margin of 44.51% dipped below the full-year average of 46.2%. Revenue concentration is moderate, with KFC and Taco Bell comprising over 80% of segment sales, creating dependency on the success of these two core brands. Earnings volatility is evident in quarterly net income, which ranged from $253 million to $535 million over the past year.
Market & Competitive Risks: The stock faces significant valuation compression risk, trading at a trailing P/E of 26.98x, a premium to sector peers. Its recent negative relative strength against the market (-13.75% over 1 month) indicates sector-specific selling pressure, potentially due to concerns over consumer spending. Competitive disruption is a constant threat in the crowded QSR space, where value perception is key. While a beta of 0.60 suggests lower macro sensitivity, recent news highlights the risk of weak consumer spending impacting the entire restaurant sector, as seen with Domino's.
Worst-Case Scenario: The most damaging scenario involves a severe consumer recession leading to declining same-store sales across YUM's franchise base, coupled with rising interest rates increasing its debt servicing costs. This could trigger a wave of franchisee distress, reducing royalty income and forcing YUM to provide financial support. Analyst EPS estimates could fall to the low end of $10.31, and the valuation multiple could compress toward the lower end of its historical range. Realistic downside could see the stock re-testing its 52-week low of $137.33, representing a loss of approximately 7% from the current price, with further downside to $125 (-16%) possible if sentiment deteriorates severely.
