Analysts Digest Earnings: Yum! Brands Inc., Chipotle Mexican Grill Inc.

Yum! Brands Inc.

rose and Chipotle Mexican Grill Inc.

fell in response to earnings but the story of neither restaurant chain is lacking in ambiguity. Not that the two companies have much in common, besides casual dining. WIth Yum, "it's all about China," where the company gets half its revenue, said Barclay's Jeffrey Bernstein, who maintained an Equal Weight rating on Yum but raised his target 3 percent to $82. As for Chipotle, where recent earnings rose 50 percent, "the current level of growth isn't sustainable" according to Bernstein, who cut his price target 6 percent to $685, maintaining an Equal Weight rating. Yum gained 3 percent recently to $83.52; Chipotle traded down 6 percent to $650.50. Yum bulls are encouraged by its recent same-store sales improvements in China, while bears question whether operations there can fully recover as the novelty of pizza and fried chicken wears off, Bernstein said. Cowen's Andrew M. Charles maintained a Market Perform rating and $81 target on Yum, while Stifel's Paul Westra rates the stock a Buy. Westra, who maintains a $110 target on Yum, believes an activist-lead campaign will emerge later this year forcing the company to undertake a debt-financed buyback. A food safety scare in China hit Yum last summer and has continued to haunt results. Same-store sales there continued to fall in the first quarter, but at a slower-than-expected rate. "These results have bought the company some time," said Morgan Stanley's John Glass, who noted widening profit margins at the company's Asian operations. Glass maintained an Equal Weight rating on Yum and called its first-quarter results "enough for now." At Chipotle, Glass maintained an Overweight rating and $749 target, suggesting that despite an inevitable slowdown, the company's story still has legs on widening profit margins, mobile payments, home delivery and on-line catering. Cowen's Andrew Charles, too, cited Cipotle's "increased digital capabilities" and a marketing campaign to sustain sales growth, and reiterated an Outperform rating and $775 target on the company. But Wedbush's Nick Setyan maintained a Neutral rating on Chipotle and shaved 6 percent from his price target to $665. Setyan noted that cheaper food costs and lower stock compensation for Chipotle executives were responsible for the company's first-quarter earnings beat. Street estimates for Chipotle same-store sales growth are "poised to come down," Setyan said, adding that clarity on results from its increased marketing and menu changes won't materialize until later this year. Wall Street analysts on average maintain a Hold rating and $81.84 target on Yum, while on Chipotle, analysts are Overweight with a $743.79 target.