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Yum Brands Inc YUM Stock Quote

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Morningstar‘s Stock Analysis YUM

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Restaurant Pulse Q3 2022: Fast Food Stocks Look Appetizing as Macro Pressure Drives Belt Tightening

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

Our restaurant coverage has taken a beating over the past two quarters, shedding 8%-10% of its market cap (albeit modestly ahead of a 12%-13% decline in Morningstar's U.S. Large Cap Index) as inflation and a weaker consumer have driven sagging near-term prospects. With wages and food costs each up about 20% since the onset of the COVID-19 pandemic, restauranteurs have been forced to absorb substantial pressure: across our coverage, we've seen a median decline of 630 basis points of restaurant margin over the past 12 months. We don't expect a full margin recovery until fiscal 2024, particularly since consumers naturally shift spending towards the relatively cheaper grocery channel amidst periods of economic pressure, blunting restaurant operators' ability to offset inflation with price increases in the higher cost per meal channel.

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Key Statistics YUM

Company Profile YUM

Business Description

Yum Brands is a U.S.-based restaurant operator featuring a portfolio of four brands: KFC (26,930 global units), Pizza Hut (18,380 units), Taco Bell (7,790 units), and The Habit Burger (310 units) at year-end 2021. With $58 billion in 2021 systemwide sales, the firm is the second-largest restaurant company in the world, behind McDonald’s ($112.5 billion) but ahead of Restaurant Brands International ($36 billion) and Starbucks ($25 billion). Yum is 98% franchised, with the largest franchisee, Yum China, created via a 2016 spinoff transaction (after which Yum China agreed to pay 3% royalties to Yum Brands in perpetuity). Yum is the newest evolution of Tricon Brands, formerly a division of PepsiCo, and generates the bulk of its revenue from franchise royalties and marketing contributions.

1441 Gardiner Lane
Louisville, KY, 40213
T +1 502 874-8300
Industry Restaurants
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 31, 2022
Employees 36,000

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