Credit Suisse Previews Yum's October 11 Investor Day

Analyst Jason West raised Credit Suisse's price target for the company from $88 to $90 and maintains a Neutral rating based on the analysis of New Yum/China.

"Yum China screens reasonably cheap in light of improving trends and peer comparisons," said West. "However, we do not see enough upside vs. the current stock price to change our Neutral rating on YUM Brands at this time."

Related Link: RBC Downgrades Yum!, Says Stock Is No Longer A "Top Pick"

West sees a bull/bear case of $110/$75 for the stock.

On investor day, West said Yum is likely to focus on the company's growth outlook, with a focus on general and administrative (G&A) savings.

According to West, the current G&A franchise mix for New YUM! is around $25 thousand per restaurant and any $1 thousand in G&A savings per store should add about 2 percent in EBITDA.

"We doubt the company will significantly increase its target for franchise mix (currently 96 percent by YE17)," added West. "We note that consensus seems to be mismodeling G&A for 2017, though this appears related to franchise mix, not cost inefficiency."

At time of publication, Yum was trading slightly down on the day at $89.78, lower by just 0.08 percent.

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