Analysts Respond To Yum's Q2 Earnings And Guidance

Yum! Brands, Inc. YUM shares are up 3.2 percent on Thursday after the company reported mostly in-line Q2 earnings, but upped its 2016 guidance once again. Following the report, several Wall Street firms have weighed in on the company.

“Despite what mgmt described as ‘challenging industry conditions’ in the U.S. market, results across the co’s three brands delivered op profit growth in line with internal expectations,” Citi analyst Gregory Badishkanian explained.

Yum reported +2 percent division-wide KFC comps, flat Pizza Hut comps and -1 percent Taco Bell comps. Management noted that all three divisions are on track to meet 2016 profit growth targets of 11 percent for KFC, 9 percent for Taco Bell and 7 percent for Pizza Hut.

According to Morgan Stanley analyst John Glass, flat overall comps in China were a pleasant surprise. “Though we’ve false started before, it would be a significant change in momentum if it sustains,” Glass said of China.

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Finally, Oppenheimer analyst Brian Bittner addressed the company’s cash return.

“YTD through 7.12, YUM has repurchased $2.4 billion in stock (including $841 million in 3Q-to-date) and $3.3 billion since China separation announcement in October 2015,” Bittner wrote.

“This leaves $2.9 billion to be returned prior to 10/31 separation. YUM also plans to continue returning capital to shareholders post-separation with New-YUM targeting $2–2.5 billion in ‘17E and $1.5–1.8 billion in 2018E.”

The three firms have the following ratings and price targets for Yum:

• Oppenheimer: Outperform ($93)
• Morgan Stanley: Equal Weight ($86)
• Citi: Neutral ($88)

At time of writing, Yum was up 2.90 percent on the day, trading at $88.23.

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Disclosure: The author holds no position in the stocks mentioned.