Analyst Note| Sean Dunlop |
Wide-moat Yum Brands posted mixed first-quarter results, with sales ($1.55 billion) and adjusted earnings ($1.05) clocking in below our forecasts for $1.69 billion and $1.21, respectively. This was exclusively driven by exogenous events—sales softness in China attributable to omicron-induced lockdowns and a modest profit drag from suspended Russian operations—and the long-term prospects of the business continue to align with our expectations. As we offset near-term pressure in China, the (probable) loss of about 3% of operating income from those Russian stores, and better-than-expected unit growth figures, we expect little impact to our $124 fair value estimate. Shares look slightly cheap at current market prices.