Loop Capital has maintained its Hold rating and $143.00 price target for Yum! Brands (NYSE: NYSE:YUM), the parent company of Taco Bell.
The firm's analysis indicated that Taco Bell's same-store sales growth in the United States decelerated towards the end of the third quarter of 2024, yet the performance met the expectations for the entire quarter.
According to Loop Capital's research, Taco Bell experienced a slowdown in same-store sales growth from 3-4% during the initial seven weeks of the third quarter to approximately 2% in the latter six weeks.
This deceleration resulted in an estimated 3% increase in same-store sales for the quarter, aligning with both Loop Capital's and the consensus estimates.
The report further detailed that on a two-year stacked basis, Taco Bell's 3% growth in the third quarter translates to an 11% gain, which is an improvement from the 9% two-year stack reported in the second quarter of 2024. The three-year stacked growth rate for the third quarter remained steady at 17%, mirroring the figures from the previous quarter.
Loop Capital's decision to maintain its Hold rating and price target reflects an 18 times multiple of the company's projected 2025 enterprise value to EBITDA (earnings before interest, taxes, depreciation, and amortization).
The firm's analysis suggests a consistent performance for Yum! Brands, with Taco Bell's sales growth matching the anticipated figures despite a noticeable slowdown in the later part of the quarter.
In other recent news, Yum! Brands reported a 10% growth in core operating profit for the second quarter of 2024, with Taco Bell and KFC International being significant contributors to system sales and operating profit growth.
Loop Capital maintained its Hold rating on Yum! Brands, keeping a steady price target of $143.00, reflecting current sales trends observed at Taco Bell franchisees across the United States. However, the company experienced a 3% decline in comparable sales for both KFC and Pizza Hut.
Yum! Brands also announced a quarterly dividend of $0.67 per common share. The company is planning for further expansion in the UK and Canada, primarily focusing on Pizza Hut, and expects at least 8% core operating profit growth in 2025.
The company's focus on affordable consumer options, digital expansion, and sustainable practices has contributed to its positive outlook.
Taco Bell outperformed expectations with a 5% increase in comparable sales, exceeding both the firm's 4% growth estimate and the consensus prediction of a 3% rise. The company is also making strides in its technology strategy, including the deployment of AI-enabled systems and the expansion of its digital platforms.
InvestingPro Insights
To complement Loop Capital's analysis of Yum! Brands, InvestingPro data offers additional insights into the company's financial health and market position. Yum! Brands currently boasts a market capitalization of $39.15 billion, reflecting its significant presence in the fast-food industry. The company's P/E ratio stands at 25.15, which aligns with an InvestingPro Tip noting that Yum! is "Trading at a high P/E ratio relative to near-term earnings growth."
Despite the observed deceleration in Taco Bell's same-store sales growth, Yum! Brands has demonstrated resilience in its financial performance. The company's revenue for the last twelve months as of Q2 2024 reached $7.105 billion, with a modest growth of 1.63%. More impressively, Yum! Brands achieved an EBITDA growth of 11.79% over the same period, indicating effective cost management and operational efficiency.
InvestingPro Tips also highlight Yum! Brands' commitment to shareholder returns, having "maintained dividend payments for 21 consecutive years" and "raised its dividend for 6 consecutive years." This consistent dividend policy, coupled with a current dividend yield of 1.92%, may appeal to income-focused investors.
For those considering Yum! Brands' stock, it's worth noting that it's currently trading near its 52-week high, with the price at 97.23% of its peak. This aligns with another InvestingPro Tip stating the stock is "Trading near 52-week high," which could be interpreted as a sign of investor confidence in the company's performance and outlook.
Investors seeking a more comprehensive analysis can access additional insights through InvestingPro, which offers 8 more tips for Yum! Brands, providing a deeper understanding of the company's financial position and market dynamics.
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