Yum! Brands
YUM
$146.33
+3.88%
Yum! Brands, Inc. is the world's second-largest restaurant company by systemwide sales, operating a portfolio of iconic quick-service brands including KFC, Taco Bell, Pizza Hut, and Habit Burger across more than 63,000 restaurants in 155 markets, with approximately 97% of locations franchised. The company's distinct competitive identity rests on an asset-light, royalty-driven model that generates 64% of revenue from recurring franchise fees and marketing contributions, insulating it from much of the operating cost volatility that pressures company-owned restaurant operators. The current investor narrative is dominated by the recently announced $2.3 billion sale of the struggling Pizza Hut brand to private equity, a strategic pivot designed to sharpen focus on the higher-growth KFC and Taco Bell banners while strengthening the balance sheet. This divestiture, alongside Yum China's concurrent acquisition of the Pizza Hut brand in China, has sparked debate over whether the simplified portfolio can reignite systemwide sales momentum amid a challenging global consumer spending environment and intensifying quick-service restaurant competition.…
YUM
Yum! Brands
$146.33
Related headlines
Investment Opinion: Should I buy YUM Today?
The synthesized recommendation is a Hold with a bullish bias, reflecting the disconnect between the stock's recent price weakness and its fundamental strengths. The analyst consensus is 'buy' with an average target of $173.79, implying 23.4% upside, but the stock's 21.77 percentage point underperformance versus the S&P 500 over the past year and its position near 52-week lows suggest that the market is pricing in significant risks. The core thesis is that YUM's asset-light, franchise-driven model generates robust free cash flow of $1.649 billion TTM and a 20.98% net margin, which should support the dividend and buyback program, but near-term headwinds from the Pizza Hut divestiture and a challenging consumer environment warrant caution.
Supporting evidence for a Hold includes: 1) Revenue growth accelerated to 15.22% YoY in Q1 2026, up from 6.4% in Q4 2025, indicating improving momentum; 2) Net margin expanded to 20.98% from 14.16% a year ago, showcasing operating leverage; 3) Free cash flow of $1.649 billion TTM comfortably covers the 1.88% dividend yield and $185 million in quarterly buybacks; and 4) The forward PE of 20.08x is slightly below the S&P 500's 22x, offering relative value. However, the PEG ratio of 4.61 and EV-to-EBITDA of 19.14x are elevated, and the negative equity position limits financial flexibility.
The biggest risks that could invalidate the thesis are: 1) A breakdown below the 52-week low of $137.33, which could trigger accelerated selling and a drop toward $120; 2) Failure to sustain revenue growth above 10% as the Pizza Hut divestiture removes a revenue stream; and 3) Margin compression if input costs rise or consumer spending weakens. The rating would upgrade to Buy if the stock reclaims $155 and revenue growth sustains above 12%, or downgrade to Sell if free cash flow falls below $1.2 billion or the dividend payout ratio exceeds 60%. Relative to its history and peers, YUM appears fairly valued to slightly overvalued, with the market pricing in a successful turnaround that has yet to fully materialize.
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YUM 12-Month Price Forecast
YUM presents a balanced risk/reward profile, with the bull case supported by accelerating revenue growth, strong free cash flow, and a discounted forward PE relative to the market, while the bear case is anchored by the stock's 21.77 percentage point underperformance versus the S&P 500 and its proximity to 52-week lows. The Pizza Hut divestiture is a double-edged sword: it simplifies the portfolio but removes a revenue stream and introduces execution risk. Analyst consensus remains bullish with a $173.79 average target, but the wide range ($147-$200) signals uncertainty. I would upgrade to bullish if the stock reclaims $155 and revenue growth sustains above 12%, and downgrade to bearish if free cash flow falls below $1.2 billion or the dividend payout ratio exceeds 60%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $173.79 and implied upside of +18.8% versus the current price.
Average Target
$173.79
0 analysts
Implied Upside
+18.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$147 - $200
Analyst target range
YUM is covered by 22 analysts, with a consensus recommendation of "buy" and a recommendation mean of 2.15 (on a scale where 1 is Strong Buy and 5 is Strong Sell), indicating a moderately bullish stance. The average price target of $173.79 implies a substantial 23.4% upside from the current price of $140.87, suggesting that analysts believe the recent sell-off has created an attractive entry point. The consensus EPS estimate of $10.73 for the forward year, combined with the estimated revenue average of $11.104 billion, implies that analysts expect both top-line growth and margin expansion. Despite the bullish consensus, the recent institutional ratings show a mix of actions, with Morgan Stanley upgrading to Overweight in June 2026, while Citigroup maintained a Neutral rating in July 2026, indicating that not all analysts are convinced the turnaround story is fully de-risked.
The target price range spans from a low of $147.00 to a high of $200.00, a spread of $53.00 or approximately 36% of the current price, which signals meaningful uncertainty about the company's future prospects. The low target of $147.00 implies just 4.4% upside and likely assumes that the Pizza Hut divestiture fails to catalyze growth, consumer spending remains weak, and margin pressures persist. The high target of $200.00 implies 42.0% upside and likely assumes successful execution of the strategic pivot, accelerating systemwide sales at KFC and Taco Bell, multiple expansion as the market rewards the simplified business model, and potentially a re-rating as the company returns capital from the Pizza Hut sale proceeds. The wide spread between the high and low targets, combined with the recent downgrade-to-neutral actions from Citigroup and the mixed ratings from other firms, suggests that while the consensus leans bullish, there is significant dispersion in analyst views, and the stock's recent price weakness may reflect the market pricing in the more bearish scenarios.
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Bulls vs Bears: YUM Investment Factors
The bear case currently has stronger evidence, as YUM's 21.77 percentage point underperformance versus the S&P 500 over the past year and its position near 52-week lows reflect deep investor skepticism. However, the bull case rests on tangible fundamental improvements: 15.22% revenue growth in Q1 2026, a 20.98% net margin, and $1.65 billion in free cash flow, which suggest the core business is healthy. The most important tension is whether the Pizza Hut divestiture will successfully simplify the portfolio and reignite growth at KFC and Taco Bell, or whether it will expose the company to greater concentration risk in a challenging consumer environment. If the divestiture proves accretive and growth sustains above 10%, the stock could re-rate toward analyst targets; if growth stalls, the current valuation premium may compress further.
Bullish
- Analyst consensus sees 23.4% upside: 22 analysts rate YUM a 'buy' with an average target price of $173.79, implying 23.4% upside from the current $140.87. The high target of $200.00 suggests 42% upside if the Pizza Hut divestiture successfully unlocks value.
- Revenue growth accelerated to 15.2% YoY: Q1 2026 revenue grew 15.22% year-over-year to $2.059 billion, a sharp acceleration from 6.4% in Q4 2025 and 8.4% in Q3 2025. This suggests the core KFC and Taco Bell brands are gaining momentum.
- Net margin expanded to 20.98%: Q1 2026 net income rose to $432 million with a 20.98% net margin, up from $253 million and 14.16% in Q1 2025. Operating margin also expanded to 31.28% from 30.67%, reflecting operating leverage.
- Strong free cash flow of $1.65B TTM: YUM generated $1.649 billion in trailing-twelve-month free cash flow, comfortably covering its $207 million quarterly dividend and $185 million in buybacks. The 1.88% dividend yield is sustainable with a 50.6% payout ratio.
Bearish
- Stock down 5.55% amid broad market rally: YUM has declined 5.55% over the past year while the S&P 500 gained 16.22%, a 21.77 percentage point underperformance. This relative weakness signals company-specific headwinds rather than temporary market-driven selling.
- Trading near 52-week low at $140.87: The stock sits just 2.6% above its 52-week low of $137.33 and 17.2% below its high of $170.14, placing it in the bottom 3% of its 52-week range. A breakdown below $137.33 could trigger accelerated selling.
- PEG ratio of 4.61 signals overvaluation: The PEG ratio of 4.61 indicates the stock is expensive relative to its expected growth rate, a cautionary signal for valuation-sensitive investors. The forward PE of 20.08x is based on estimated EPS of $10.73, which may be optimistic.
- Negative equity and high leverage: YUM has a negative debt-to-equity ratio of -1.63 and a price-to-book ratio of -5.74 due to negative shareholder equity. The cash ratio of 0.22 and quick ratio of 0.65 suggest a tight liquidity position.
YUM Technical Analysis
YUM is mired in a sustained downtrend, with the stock down 5.55% over the past year and 6.39% year-to-date, a stark underperformance against the S&P 500's 16.22% one-year gain. At a current price of $140.87, the stock sits just 2.6% above its 52-week low of $137.33 and a full 17.2% below its 52-week high of $170.14, placing it in the bottom 3% of its 52-week range. This positioning near the lows signals persistent selling pressure and negative momentum rather than a value opportunity, as the stock has failed to establish any meaningful base despite multiple attempts at recovery. The relative strength metrics confirm the severity of the underperformance, with YUM trailing SPY by 21.77 percentage points over one year and 27.58 percentage points over six months, indicating a structural derating rather than a temporary pullback.
Short-term momentum has deteriorated sharply, with the stock down 6.30% over the past month and 8.71% over three months, accelerating the longer-term decline. The most recent price action is particularly concerning: YUM fell from $152.54 on September 3 to $140.87 by September 11, a 7.6% decline in just six trading sessions, suggesting intensifying selling pressure. This one-month decline of 6.30% compares unfavorably to SPY's 1.06% decline over the same period, resulting in a relative strength of -5.24 percentage points, confirming that the weakness is company-specific rather than market-driven. The 3.58 short ratio indicates that short sellers have built a meaningful position, which could amplify volatility in either direction, while the recent breakdown below the $145 level suggests that momentum remains firmly negative.
Key technical support rests at the 52-week low of $137.33, just 2.6% below the current price, and a breakdown below this level would likely trigger accelerated selling and open the door to new multi-year lows. Resistance is established at the 52-week high of $170.14, but more immediately, the stock would need to reclaim the $150-$155 zone to signal any meaningful trend reversal. The stock's beta of 0.551 indicates it is roughly 45% less volatile than the broader market, which means the magnitude of these declines is notable given the low-beta profile; for context, a 5.55% annual decline in a 0.55-beta stock implies significant idiosyncratic headwinds. The maximum drawdown of -16.23% over the period further underscores the persistent erosion of shareholder value, and with the stock trading below all major moving averages, the technical picture remains bearish until a sustained break above $155 materializes.
Beta
0.55
0.55x market volatility
Max Drawdown
-16.2%
Largest decline past year
52-Week Range
$137-$170
Price range past year
Annual Return
-2.1%
Cumulative gain past year
| Period | YUM Return | S&P 500 |
|---|---|---|
| 1m | -1.2% | -2.0% |
| 3m | -7.2% | +1.4% |
| 6m | -8.0% | +15.0% |
| 1y | -2.1% | +15.7% |
| ytd | -2.8% | +11.6% |
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YUM Fundamental Analysis
Yum's revenue trajectory shows encouraging acceleration, with Q1 2026 revenue of $2.059 billion representing 15.22% year-over-year growth from $1.787 billion in Q1 2025. This marks a significant improvement from the prior quarters, where Q4 2025 revenue of $2.514 billion grew 6.4% YoY from $2.362 billion, and Q3 2025 revenue of $1.980 billion grew 8.4% from $1.826 billion. The segment breakdown reveals that KFC Global is the largest contributor at $879 million, followed by Taco Bell Global at $797 million, Pizza Hut Global at $253 million, and Habit Burger at $130 million. The strong Q1 2026 growth, coupled with the strategic divestiture of Pizza Hut, suggests that the company's core KFC and Taco Bell brands are gaining traction, though the sustainability of this acceleration remains a key question given the challenging consumer environment.
Profitability remains robust, with Q1 2026 net income of $432 million on a 20.98% net margin, up from $253 million and a 14.16% net margin in Q1 2025. Gross margin came in at 44.68% in Q1 2026, relatively stable compared to 46.84% in Q1 2025 and 44.51% in Q4 2025, while the operating margin expanded to 31.28% from 30.67% a year ago. The company's net margin of 18.98% and operating margin of 30.80% are strong for the restaurant industry, reflecting the high-margin royalty stream from its franchise-heavy model. However, the gross margin has compressed slightly from the 46.8%-47.0% range seen in mid-2025, and the effective tax rate has fluctuated significantly, from 41.03% in Q1 2025 to 16.28% in Q1 2026, which has flattered net income growth and warrants monitoring.
Yum's balance sheet presents a mixed picture, with a negative debt-to-equity ratio of -1.63 reflecting the company's negative shareholder equity, a common characteristic of heavily franchised businesses that return capital aggressively. The current ratio of 1.35 indicates adequate short-term liquidity, but the cash ratio of 0.22 and quick ratio of 0.65 suggest a tight cash position relative to current liabilities. Free cash flow remains solid at $1.649 billion on a trailing twelve-month basis, with Q1 2026 free cash flow of $341 million, down from $482 million in Q4 2025 but up from $333 million in Q1 2025. The company returned significant capital to shareholders, paying $207 million in dividends and repurchasing $185 million in stock in Q1 2026 alone, while also reducing debt by $42 million. The dividend payout ratio of 50.61% and dividend yield of 1.88% are sustainable given the FCF generation, but the negative equity and high leverage relative to equity warrant careful monitoring, particularly as the Pizza Hut sale proceeds are deployed.
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?
With net income firmly positive at $432 million in the most recent quarter and $1.56 in quarterly EPS, the PE ratio is the appropriate primary valuation metric. YUM currently trades at a trailing PE of 27.06x and a forward PE of 20.08x, with the gap between these two multiples implying that the market expects meaningful earnings growth over the next twelve months. The forward PE of 20.08x is based on estimated EPS of $10.73, which represents a substantial increase from the trailing EPS of $0.037 (which appears distorted, likely due to one-time items or accounting adjustments), suggesting that analysts anticipate normalized earnings power well above recent reported levels. The PEG ratio of 4.61, however, indicates that the stock is expensive relative to its expected growth rate, which is a cautionary signal for valuation-sensitive investors.
Compared to the broader restaurant industry, YUM's valuation appears stretched on several metrics. The price-to-sales ratio of 5.12x and EV-to-EBITDA of 19.14x are elevated for a company growing revenue at a mid-teens pace, though the franchise-heavy model justifies some premium given the recurring, high-margin nature of royalty revenue. The price-to-free-cash-flow ratio of 20.92x is more reasonable, reflecting the company's strong cash generation, but the price-to-book ratio of -5.74 is not meaningful due to negative equity. Without explicit industry average data provided, we note that the S&P 500 trades at approximately 22x forward earnings, and YUM's forward PE of 20.08x represents a slight discount to the broader market, which may be justified given the company's lower beta and defensive characteristics, but the premium to typical restaurant peers on sales and EBITDA multiples suggests the market is pricing in successful execution of the Pizza Hut divestiture and renewed growth at KFC and Taco Bell.
Historically, YUM's valuation has ranged widely, with the PE ratio fluctuating between 17.18x (Q3 2021) and 43.71x (Q1 2025) over the past several years. The current trailing PE of 27.06x sits in the middle of this historical range, while the PS ratio of 5.12x is near the lower end of its historical band, which has ranged from approximately 15.90x to 24.79x on a quarterly basis (though these figures appear to use different revenue bases). The EV-to-EBITDA multiple of 19.14x is above the historical average of approximately 15-17x, suggesting the market is assigning a premium multiple relative to the company's own history. This premium valuation, combined with the stock's recent price weakness, creates an interesting dynamic: either the market is pricing in a successful turnaround that has yet to materialize in the financials, or the stock is becoming increasingly attractive on a relative basis as the price declines toward the lower end of its historical valuation band.
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
YUM's financial risks are primarily balance-sheet related, with a negative debt-to-equity ratio of -1.63 and negative shareholder equity of -$5.74 per share. While the franchise-heavy model generates strong free cash flow of $1.649 billion TTM, the cash ratio of 0.22 and quick ratio of 0.65 indicate limited liquidity buffers relative to current liabilities. The company's interest expense of $128 million in Q1 2026 consumes a meaningful portion of operating income, and the effective tax rate has fluctuated widely from 41.03% in Q1 2025 to 16.28% in Q1 2026, flattering recent net income growth. Additionally, the gross margin has compressed slightly from 46.8% in mid-2025 to 44.68% in Q1 2026, which warrants monitoring if input costs rise.
Market and competitive risks are significant given YUM's premium valuation and recent underperformance. The stock trades at a forward PE of 20.08x and an EV-to-EBITDA of 19.14x, above its historical average of 15-17x, leaving little room for execution missteps. The PEG ratio of 4.61 suggests the market may be overpaying for growth, and any deceleration could trigger multiple compression. Competitive pressures are intensifying, as evidenced by Domino's recent 52-week low amid CEO transition and slowing sales, highlighting sector-wide challenges. With a beta of 0.551, YUM is less sensitive to market swings, but its 21.77 percentage point underperformance versus the S&P 500 over the past year indicates idiosyncratic headwinds that could persist if consumer spending weakens.
The worst-case scenario for YUM would involve a failed execution of the Pizza Hut divestiture, a slowdown in KFC and Taco Bell systemwide sales, and continued margin pressure, leading to a breakdown below the 52-week low of $137.33. In this scenario, the stock could retest its analyst low target of $147.00, but a more severe outcome could see it fall to the 52-week low of $137.33, representing a 2.5% decline from current levels, or even lower if broader market conditions deteriorate. Given the maximum drawdown of -16.23% over the past period, a realistic downside from the current price of $140.87 could be -10% to -15%, targeting the $120-$127 range, especially if the company misses earnings expectations or provides weak guidance.
FAQ
The most severe risk is financial: YUM has negative shareholder equity (debt-to-equity of -1.63) and a tight liquidity position (cash ratio of 0.22), which limits financial flexibility. Second, competitive and market risks are high, as the stock trades at a premium valuation (EV/EBITDA of 19.14x) and faces intense competition from peers like Domino's, which recently hit a 52-week low. Third, execution risk around the $2.3 billion Pizza Hut divestiture could disrupt operations and remove a revenue stream. Fourth, macroeconomic sensitivity, while mitigated by a low beta of 0.551, remains a concern given weak consumer spending trends. A breakdown below the 52-week low of $137.33 could trigger a 10-15% decline toward $120.
Our 12-month forecast assigns a 50% probability to the base case, with a target range of $147.00 to $173.79, reflecting modest upside from the current $140.87. The bull case (30% probability) targets $173.79 to $200.00, driven by successful execution of the Pizza Hut divestiture and accelerating KFC/Taco Bell growth. The bear case (20% probability) targets $120.00 to $137.33, assuming a breakdown below the 52-week low amid growth stagnation. The most likely scenario is the base case, where revenue grows 8-10% YoY and margins remain stable around 20%. Key assumptions include no major macroeconomic deterioration and a smooth divestiture process.
YUM appears fairly valued to slightly overvalued. The forward PE of 20.08x is a slight discount to the S&P 500's 22x, but the PEG ratio of 4.61 indicates the stock is expensive relative to its expected growth rate. The EV-to-EBITDA of 19.14x is above the historical average of 15-17x, suggesting the market is pricing in a successful turnaround. The price-to-sales ratio of 5.12x is elevated for a company growing revenue at a mid-teens pace, though the franchise-heavy model justifies some premium. Compared to restaurant peers, YUM trades at a premium on most metrics, implying the market expects the Pizza Hut divestiture to unlock significant value. If growth disappoints, multiple compression could drive the stock lower.
YUM offers a mixed risk/reward proposition. On the positive side, the stock trades at a forward PE of 20.08x, slightly below the S&P 500's 22x, and analysts see 23.4% upside to their average target of $173.79. The company generates $1.649 billion in free cash flow and pays a sustainable 1.88% dividend. However, the stock is down 5.55% over the past year, underperforming the S&P 500 by 21.77 percentage points, and sits just 2.6% above its 52-week low. The biggest downside risk is a breakdown below $137.33, which could send shares toward $120. For long-term investors comfortable with volatility and a 12-18 month horizon, the risk/reward is favorable, but near-term momentum remains negative.
YUM is better suited for long-term investment, with a suggested minimum holding period of 12-18 months. The company's low beta (0.551), sustainable dividend yield (1.88%), and strong free cash flow ($1.649 billion TTM) make it a defensive holding for income-oriented portfolios. However, the stock's recent negative momentum (down 6.30% in the past month) and proximity to 52-week lows make it a poor candidate for short-term trading. The Pizza Hut divestiture and subsequent restructuring will take time to materialize in financial results, so investors should be patient. Earnings visibility is moderate, with analyst EPS estimates ranging from $10.36 to $11.21 for the forward year, suggesting some uncertainty. A long-term horizon allows investors to capture the potential re-rating as the simplified portfolio drives growth.
