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Are Yum Brands' Global Green Shoots Sustainable?

Are Yum Brands' Global Green Shoots Sustainable? - Yum! Brands, Inc. NYSE:YUM

Barclays maintained its Equal-Weight rating on Yum! Brands, Inc. YUM 0.88%, saying volatility remains outsized in Yum's ongoing China recovery, which remains the primary focus for investors until the October 31 separation of China business.

"While 2Q16 China comps were not inspiring, 3Q16 QTD is much improved at both brands. The question remains whether the green shoots are sustainable, especially as compares are very difficult later in 3Q16," analyst Jeffrey Bernstein wrote in a note.

Bernstein noted, outside China, "challenging industry conditions" in the United States drove the soft second-quarter comps.

But similar to China, the analyst added that there are signs of acceleration in U.S. comp at both KFC and Taco Bell recently. Based on recently encouraging trends, 2016 profit growth guidance was lifted (again), now 14+ percent (up from 12 percent).

"And the China separation is on track, along with completion of their recap, with sights set on being a primarily franchised (96+ percent), heavily levered (~5x) global QSR with plans to return significant cash. We remain intrigued though opt to let the dust settle, with prior green shoots short-lived," Bernstein highlighted.

Meanwhile, the analyst cut his full-year EPS view by $0.01 to $3.69, in line with consensus, but raised the price target by $5 to $88.

At time of writing, shares of Yum modestly declined 0.37 percent on the day to $87.87.

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DateFirmActionFromTo
Jul 2016BarclaysMaintainsEqualweight
Jul 2016JP MorganMaintainsOverweight
Jul 2016NomuraMaintainsBuy

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