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5 Top Takeaways From Yum's Investor Day

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With the separation of YUM China expected by October 31, Yum! Brands, Inc’s (NYSE: YUM) 2016 Investor Conference highlighted “two powerful, independent, focused growth companies,” Barclays’ Jeffrey A. Bernstein said in a report. He maintained an Equal-weight on the company, while raising the price target from $88 to $92.

The event focused on the New YUM, Bernstein mentioned, while pointing out that YUM China would no longer be “the outsized profit driver” for the New YUM. He wrote further, “We believe the separation is long overdue, now allowing investors to choose between two distinct platforms… the New YUM (more mature, franchised, heavily levered, return of cash focused, global platform) or YUM China (high growth, emerging market, co-op platform).”

Related Link: Yum Brands Lays Out China Plans

Top 5 Takeaways

Bernstein mentioned top five takeaways from the investor event, stating that they were all about financial strategies:

  1. Increasing the franchise target to 98 percent by 2018, from 96 percent by 2017, versus 93 percent at the time of the China separation
  2. Reducing the capex target to $100 million by 2019, down from $500 million in 2015 pro-forma at China separation
  3. Reducing G&A by a cumulative $300 million by 2019, representing ~1.7 percent of system sales, prior to normalized growth
  4. Maintaining a targeted capital structure of ~5x EBITDA leverage
  5. Expanding the cash return target to $13.5 billion from mid-Q4 of 2015 to 2019, up from the prior $10 $13.5 billion by 2018.

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Latest Ratings for YUM

Jun 2018BTIG ResearchUpgradesNeutralBuy
Jun 2018CitigroupMaintainsNeutralNeutral
May 2018BarclaysMaintainsEqual-WeightEqual-Weight

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Posted-In: Barclays Jeffrey A. BernsteinPrice Target Reiteration Restaurants Analyst Ratings General


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