Oppenheimer Says Yum! Brands Reward Outweighs Risk, Places $90 Price Target

In a report published Monday, Oppenheimer analyst Brian Bittner reiterated an Outperform rating on shares of

with a price target boosted to $90 from a previous $80, noting that the company's near-term results are "tough to call" but the fundamental setup may improve over the long-term. According to Bittner, shares are "too compelling" below $80 as the analyst's models suggests a valuation range of $75 to $106 based on extreme low and high China cases. For 2015, Street models are assuming a 1.2 percent China same-store sales growth (below the company's guidance of 3 percent to 7 percent) and restaurant margins of 15.2 percent (also below the company's guidance of 16 percent). The analyst noted that "encouragingly"

commented on its March 24 conference call that KFC-China demand has improved sequentially, marking a positive sign before comparisons drop to a favorable -15 percent in the second half of 2015. "We believe current risk overhang from China allows investors to buy in lower-quadrant of risk/reward curve with limited downside supported by highly valuable ex-China contributors of the business," Bittner wrote. Bittner continued, Taco Bell's domestic breakfast segment has plenty of upside as innovation (new menu items such as biscuit taco) and marketing ("fresh" TV commercials featuring celebrities) ramp. Yum Brands is scheduled to report its first quarter results on Tuesday after market close. The analyst estimated the company will earn $0.71 per share on revenue of $2.666 billion. This compares to the