UBS On Yum's Path To Recovery...And Beyond
In a report published Wednesday, UBS analysts maintained a Buy rating on Yum! Brands, Inc. (NYSE: YUM), with a price target of $100, following the company's China/India investor presentation.
The analysts expressed their optimism regarding the growth opportunities in both China and India.
In the report UBS noted the key highlights from the China discussion as:
- Product and marketing (including social and digital) as core to recovery efforts
- Aggressive focus on coffee as an underpenetrated consumer good
- Opportunity to optimize pricing sophistication at KFC across cities
- Higher quality unit growth through more disciplined and resourceful approach to development
- KFC remodel acceleration without capex risk
- PH margin/return strength supportive of profit recovery and robust unit growth outlook
- Underappreciated PH delivery business could eventually provide best returns in the YUM portfolio
The analyst enumerated the key takeaways from the India discussion as:
- Reversal of difficult macros and investments that have held back profits is coming
- Business will begin to leverage sales growth with G&A infrastructure in place
- KFC menu development opportunity remains significant
- PH delivery investment supports imminent unit growth acceleration
- Digital competitive advantage positions brands favorably against peers
- Local sourcing and vertical integration structure proactively help avoid supply chain issues
Upside to Yum! Brands's shares would be supported by a China recovery and optionality, the analysts added.
Latest Ratings for YUM
|Feb 2017||Longbow Research||Downgrades||Buy||Neutral|
|Oct 2016||Credit Suisse||Upgrades||Neutral||Outperform|
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