KFC Owner Yum Brands Sees Slower Sales Growth, Goldman Sachs Analyst Revises Forecast

Yum! Brands, Inc. YUM released earnings results for its second quarter Tuesday before the opening bell.

Analysts covering the Louisville, Kentucky-based company provided their takes:

• Goldman Sachs analyst Christine Cho maintained the Neutral rating on Yum! Brands with a price forecast of $150.
• Piper Sandler analyst Brian Mullan reiterated the Neutral rating on Yum Brands with a price forecast of $140.
• BMO Capital Markets analyst Andrew Strelzik has a Market Perform rating on Yum! Brands, with a price forecast of $135.

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Goldman Sachs: Cho revised the EBITDA forecasts for FY24, FY25, and FY26 to $2.73 billion, $2.97 billion, and $3.26 billion, respectively, down from $2.73 billion, $2.99 billion, and $3.3 billion.

This adjustment reflects slightly weaker same-store sales growth and revenue trends, which are somewhat mitigated by reduced general and administrative expenses.

Piper Sandler: Mullan writes that while the top line in the year’s second half will be softer than management was forecasting at the beginning of the year, same-store sales will sequentially improve as the calendar moves from the second quarter to the third quarter and fourth quarter.

On top of that, the analyst notes that adjusted G&A dollars were down ~9 to 10% in the quarter, and management shared that it expects this line to be down on an FY2024 basis.

As the quarter concludes, analysts anticipate minimal changes to consensus-adjusted EPS estimates for 2024 through 2026. Any potential reductions in sales are expected to be roughly balanced by lower G&A expenses.

Mullan raised the FY25 revenue estimate to $8.078 billion from $7.952 billion.

BMO Capital Markets: Yum Brands owns three major quick-service chains: Taco Bell, Pizza Hut and KFC.

The company appears well-positioned to execute against its long-term growth algorithm over time, and its portfolio should be well-suited for a softer consumer spending environment.

The company continues to leverage G&A expenses to bolster its operating profit outlook.

While optimistic about long-term fundamentals, the analyst currently prefers global fast-food peers such as Domino’s Pizza Inc DPZ, McDonald’s Corporation MCD, and Restaurant Brands International Inc. QSR.

Strelzik expects the company to report FY24 revenues of $7.600 billion, and FY25 revenues of $8.093 billion.

Price Action: YUM shares are trading lower by 0.38% to $136.33 at last check Wednesday.

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