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The analysts, who have a Buy rating and $156 price target on YUM, told investors in a note that Taco Bell is set for further outperformance and supports YUM as a “quality compounder.”
“Taco Bell remains one of the premier brands in QSR, w/ accelerating growth potential contributing to upside for YUM shares,” wrote the analysts. “Following strong 1Q sss of 8%, we model a more moderate 4% sss for 2Q (Cons. 4.4%) in large part given difficult Mexican Pizza laps in May. But we anticipate outsized sales & earnings contribution will continue.”
“Our latest QSR survey results and franchisee discussions highlight confidence in TB brand strength and LT growth,” they added.
The analysts noted that investor sentiment on YUM shares has shifted more negatively due to softer year-on-year TB same-store sales, China concerns, and a lack of upside to consensus 2023 earnings estimates.
“We think less favorable investor positioning can create an opportunity for shares over time, and believe YUM should remain a core holding as a quality compounder supported by contributions from key drivers, incl. TB strength & KFC Int’l growth consistency,” they concluded.
