Restaurants aren't appealing buys in these times of economic stress, but Yum! Brands (YUM) looks appetizing, nonetheless. The world's largest stable of restaurants owns and operates such fast-food chains as KFC, Pizza Hut, and Taco Bell in over 100 countries. Yum is a standout because not only is it seeing higher sales and earnings but it's also reinvigorating U.S. sales with healthier food, such as fish, veggies, and grilled chicken.
The key drivers of Yum's growth and profitability, though, are China and other foreign markets, which account for 50% of sales, says Rick Carucci, Yum's CFO. "Yum is a great way to gain exposure to China's booming economy and the other fast-growing international markets, while investing in the only stable segment of the restaurant industry," says Ann Northrop of Zacks Investment Research, who rates the stock a buy. China (20% of sales), where Yum has 3,000 KFC eateries, "offers immense growth potential," she adds.
Joseph Buckley of Bank of America (BAC) says Yum, a client, is well positioned to generate high returns on capital and give back to investors substantial amounts of cash via share repurchases and dividends. He rates the stock, now at 26.67, a buy, with a 12-month target of 43. Buckley figures Yum will earn $1.89 a share in 2008 on sales of $11.3 billion and $2.08 in 2009 on sales of $11.9 billion. Third-quarter sales beat expectations and were "reassuring," he notes.
The key drivers of Yum's growth and profitability, though, are China and other foreign markets, which account for 50% of sales, says Rick Carucci, Yum's CFO. "Yum is a great way to gain exposure to China's booming economy and the other fast-growing international markets, while investing in the only stable segment of the restaurant industry," says Ann Northrop of Zacks Investment Research, who rates the stock a buy. China (20% of sales), where Yum has 3,000 KFC eateries, "offers immense growth potential," she adds.
Joseph Buckley of Bank of America (BAC) says Yum, a client, is well positioned to generate high returns on capital and give back to investors substantial amounts of cash via share repurchases and dividends. He rates the stock, now at 26.67, a buy, with a 12-month target of 43. Buckley figures Yum will earn $1.89 a share in 2008 on sales of $11.3 billion and $2.08 in 2009 on sales of $11.9 billion. Third-quarter sales beat expectations and were "reassuring," he notes.
-Businessweek Gene Marcial
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