After Selling Pizza Hut, Yum! Brands Is Eyeing a New Purchase: ‘We Are Prepared to Make Bold Moves’

Yum! Brands shares fell after Argus downgraded the company from Buy to Hold. The stock was trading at $137.55, down 2.19% on the day but up 2.11% year-to-date. The downgrade was based on valuation, earnings per share revisions, and visibility metrics.

Yum! Brands (YUM) was downgraded from Buy to Hold due to challenges in meeting operating profit growth targets. The stock is trading below its intrinsic value, with a 17.6% undervaluation according to GF Value™. YUM offers a 2.07% dividend yield with a 35% payout ratio and a 7.6% 3-year dividend growth rate. The company's GF Score™ is 89 out of 100, indicating strong fundamentals, particularly in profitability and valuation.

Argus downgraded Yum! Brands (YUM) to Hold from Buy, citing growth concerns due to high costs and a cyclospora outbreak. The stock has fallen 11% in six months and trades near its 52-week low. Argus sees difficulty in achieving 8% operating profit growth. Other analysts have mixed views, with some upgrading and raising price targets.

The Federal Reserve raised interest rates by 25 basis points, the first hike in three years, to combat inflation. Restaurant stocks are under pressure due to declining customer traffic. Companies like Restaurant Brands International (QSR) and Yum! Brands (YUM) may benefit from value menus. The Cheesecake Factory (CAKE) reported strong sales and profit margins. Investors should focus on companies that can maintain traffic and profitability amid rising rates.

Wells Fargo upgraded Yum! Brands (YUM) to Overweight, raising its price target to $175 from $165. The firm cited YUM's growth prospects post-Pizza Hut transition and Taco Bell's recovery. YUM trades at $145.16, near its 52-week low, with a P/E of 18.3 and a PEG ratio of 0.32. Analysts note near-term challenges but see long-term value.

Wells Fargo upgraded Yum! Brands to 'Overweight' from 'Equalweight' and raised its price target to $175 from $165. The upgrade is based on a weighted average of ratings including valuation, EPS revisions, and visibility. Yum! Brands' stock closed at $145.16, down 2.91%.