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Yum Brands has a leg up over its competitors, according to Goldman Sachs. The bank upgraded the parent company of KFC, Pizza Hut and Taco Bell to buy from neutral. Analyst Christine Cho kept her 12-month price target of $167, implying a potential upside of 16%. KFC led the company’s growth in the first quarter, with 528 openings globally — the second highest for a first quarter in the brand’s history. China remains an important market for the company, with 50%-60% of incremental global unit additions coming from the country per year. YUM YTD mountain YUM YTD chart “Further, management plans to triple Taco Bell’s international store footprint to 3,000+ stores by 2030E from 1,150 in 2024, with 40%+ contribution to new store growth from the brand’s Big 4 markets (UK, Spain, Australia, and India) and with plans to expand into markets like France, Poland, Germany, South Africa, Turkey, UAE, Greece, Ireland, and Sweden,” Cho added. Cho also pointed to Yum’s high franchise mix and geographically diverse footprint as two factors that could help the company hedge against periods of macro volatility. While Yum’s international exposure has stirred concerns about foreign boycotts following U.S. tariff announcements, Cho said international consumer sentiment toward the U.S. does not seem to have affected Yum’s top line. The analyst also singled out Taco Bell as having a record of success in a value-centric environment, calling it a “highly unique value leader with strong consumer affinity.” “While YUM is certainly not immune from the low consumer debate and stepped up competition in the U.S. (i.e., its brands have above-peer skew towards the lower income strata), we highlight the history of strong Taco Bell outperformance during heated periods of value competition,” she wrote. “We expect Taco Bell to continue to strengthen its value leadership in the U.S. through its everyday value offerings. Shares rose 1% in the premarket following the upgrade. Year to date, the stock is up 7%. Most analysts are on the sidelines when it comes to Yum Brands. LSEG data shows that 23 of 30 analysts have a hold rating on the stock. The remaining seven rate it a buy or strong buy.
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