Yum! Brands
YUM
$160.73
+1.05%
Yum! Brands, Inc. is a global quick-service restaurant (QSR) giant operating a portfolio of iconic brands including KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill. It is the world's second-largest restaurant firm by systemwide sales, distinguished by its highly franchised business model where 97% of its over 63,000 locations are operated by franchisees, generating stable royalty and marketing fee income. The current investor narrative centers on the resilience and defensive cash flow characteristics of its franchise model amid economic uncertainty, with recent news highlighting how rising gas prices may drive consumer trade-down to value-focused QSR brands within its portfolio, potentially benefiting its core chains.…
YUM
Yum! Brands
$160.73
Related headlines
YUM 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Yum! Brands's 12-month outlook, with a consensus price target around $208.95 and implied upside of +30.0% versus the current price.
Average Target
$208.95
6 analysts
Implied Upside
+30.0%
vs. current price
Analyst Count
6
covering this stock
Price Range
$129 - $209
Analyst target range
Analyst coverage is limited with only 6 analysts providing estimates, indicating this large-cap stock may have less frequent institutional research updates. The consensus sentiment leans bullish, with recent institutional ratings from firms like JP Morgan (Overweight), Evercore ISI (Outperform), and TD Cowen (Buy) supporting a positive view, though others like Citigroup and Wells Fargo maintain Neutral/Equal Weight stances. The average target price implied by estimated EPS of $11.19 and a forward PE of 21.81x is approximately $244, suggesting substantial upside from the current price of $162.79, but this extrapolation highlights the wide dispersion and uncertainty in analyst forecasts. The target range is wide, with estimated EPS spanning from a low of $10.27 to a high of $11.68; the high target likely assumes successful unit growth, stable franchisee health, and margin resilience, while the low target may factor in potential consumer spending pressure or international macroeconomic headwinds. The recent pattern of ratings shows stability, with most firms reiterating existing positions in February 2026, though Gordon Haskett upgraded the stock to Buy from Hold in January, signaling a modest positive shift in sentiment among some analysts.
Bulls vs Bears: YUM Investment Factors
The bull case for YUM is anchored in its defensive, high-cash-flow franchise model, robust profitability, and potential to benefit from consumer trade-down, supported by a low-beta profile. The bear case focuses on its premium valuation, decelerating revenue growth, and leveraged balance sheet, which leave the stock vulnerable to disappointment. Currently, the bearish arguments on valuation and momentum carry more weight, as the stock trades near the upper end of its historical P/E range while showing relative weakness. The single most important tension in the investment debate is whether YUM's premium valuation—justified by its superior franchise model—can be sustained in the face of decelerating top-line growth and a potential macroeconomic slowdown that could pressure franchisee health and systemwide sales.
Bullish
- Defensive Franchise Model & Strong Cash Flow: The 97% franchised model generates stable, high-margin royalty income, evidenced by a trailing twelve-month free cash flow of $1.641 billion and an operating margin of 30.8%. This cash flow supports a consistent dividend with a 50.6% payout ratio and provides resilience during economic uncertainty.
- Robust Profitability & Margin Expansion: Q4 2025 net income grew to $535 million, yielding a net margin of 21.3%, up from 20.1% in Q3. The quarterly gross margin of 44.51% and operating margin of 29.4% demonstrate effective cost control and the high-margin nature of the franchise business.
- Potential Beneficiary of Consumer Trade-Down: Recent news highlights rising gas prices driving consumer spending towards value-focused QSR brands. YUM's portfolio, including Taco Bell and Pizza Hut, is well-positioned to capture this trade-down effect, potentially supporting same-store sales growth in a weakening consumer environment.
- Low Volatility & Defensive Stock Characteristics: A beta of 0.66 indicates the stock is 34% less volatile than the market, making it a lower-risk holding during turbulence. This is consistent with its mature, cash-generative business model and is reflected in its steady uptrend, with a 1-year price change of +13.59%.
Bearish
- Premium Valuation Leaves Little Room for Error: The trailing P/E of 26.98x and forward P/E of 21.81x trade at a significant premium to the restaurant industry average. The EV/EBITDA of 19.14x and P/S of 5.12x are also elevated, meaning the stock is pricing in flawless execution and leaves little room for multiple expansion.
- Revenue Growth Deceleration & Market Underperformance: Q4 2025 revenue growth decelerated to 6.44% YoY from 9.2% in Q3. Furthermore, the stock's recent momentum lags the market, with a 1-month relative strength of -5.04 versus the S&P 500, signaling waning investor enthusiasm as it approaches its 52-week high.
- Negative Shareholder Equity & High Financial Leverage: The debt-to-equity ratio is negative at -1.63 due to significant share buybacks, creating a leveraged capital structure. While the interest coverage ratio of 5.55 and strong cash flow mitigate near-term risk, this structure increases sensitivity to rising interest rates and earnings volatility.
- Concentration in Mature Brands & Slower Unit Growth: Over 72% of stores are in international markets, which may face macroeconomic headwinds. Growth is heavily reliant on KFC ($1.04B revenue) and Taco Bell ($997M), while Pizza Hut ($303M) and Habit Burger ($174M) contribute less, indicating limited diversification and reliance on mature brand execution.
YUM Technical Analysis
The stock is in a sustained uptrend, evidenced by a 1-year price change of +13.59% and a 6-month gain of +12.08%. Currently trading at $162.79, the price sits at approximately 79% of its 52-week range ($137.33 to $169.39), indicating it is closer to recent highs than lows, which reflects positive momentum but also suggests limited near-term upside before testing major resistance. Recent short-term momentum shows a modest uptick, with a 1-month price change of +2.32% and a 3-month change of +1.58%, though both figures underperform the S&P 500's respective gains of +7.36% and +2.67%, as indicated by negative relative strength readings of -5.04 and -1.09. This divergence suggests YUM's rally is decelerating relative to the broader market, potentially signaling a period of consolidation or a defensive posture as it approaches its 52-week high. Key technical levels are clearly defined, with immediate support at the 52-week low of $137.33 and major resistance at the 52-week high of $169.39; a decisive breakout above $169.39 would signal a resumption of the primary uptrend, while a breakdown below $137.33 would invalidate the bullish structure. The stock's beta of 0.66 indicates it is approximately 34% less volatile than the market, which is characteristic of a mature, cash-generative franchise business and implies lower risk for position sizing during market turbulence.
Beta
0.66
0.66x market volatility
Max Drawdown
-14.4%
Largest decline past year
52-Week Range
$137-$169
Price range past year
Annual Return
+10.0%
Cumulative gain past year
| Period | YUM Return | S&P 500 |
|---|---|---|
| 1m | +0.8% | +8.5% |
| 3m | +5.1% | +2.8% |
| 6m | +12.1% | +4.6% |
| 1y | +10.0% | +32.3% |
| ytd | +6.8% | +3.9% |
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YUM Fundamental Analysis
Revenue growth is positive but decelerating on a quarterly sequential basis; Q4 2025 revenue was $2.514 billion, representing a solid year-over-year growth of 6.44%, but this marks a slowdown from the 9.2% YoY growth in Q3. Segment data reveals KFC Global Division as the largest revenue contributor at $1.041 billion in the latest period, followed by Taco Bell at $997 million, Pizza Hut at $303 million, and Habit Burger at $174 million, indicating growth is being driven by the core KFC and Taco Bell brands. The company is highly profitable with expanding margins; Q4 2025 net income was $535 million, translating to a net margin of 21.3%, and the gross margin for the quarter was 44.51%, while the trailing twelve-month operating margin stands at a robust 30.8%. Profitability has improved sequentially, as Q4 net income of $535 million and operating margin of 29.4% are up from Q3's $397 million and 33.6%, respectively, demonstrating effective cost management within its franchise-heavy model. The balance sheet is strong with ample liquidity and substantial cash generation; the current ratio is a healthy 1.35, and the company generated $1.641 billion in trailing twelve-month free cash flow, providing significant internal funding capacity for dividends and share repurchases. However, the debt-to-equity ratio is negative at -1.63 due to negative shareholder equity, a common feature for highly franchised companies with significant share buybacks, but the interest coverage ratio of 5.55 and strong free cash flow yield mitigate near-term financial risk.
Quarterly Revenue
$2.5B
2025-12
Revenue YoY Growth
+0.06%
YoY Comparison
Gross Margin
+0.44%
Latest Quarter
Free Cash Flow
$1.6B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is YUM Overvalued?
Given a positive net income of $535 million in the latest quarter, the primary valuation metric is the Price-to-Earnings (PE) ratio. The trailing PE ratio is 26.98x, while the forward PE is lower at 21.81x, indicating the market expects earnings growth, with the 19% discount between the two multiples pricing in anticipated profit expansion. Compared to sector averages, YUM trades at a significant premium; its trailing PE of 26.98x is well above the typical restaurant industry average in the low 20s, and its Price-to-Sales ratio of 5.12x and EV/EBITDA of 19.14x are also elevated, reflecting a valuation justified by its superior franchise model quality, stable cash flows, and global scale. Historically, the stock's current trailing PE of 26.98x is near the upper end of its own range over recent quarters, which has fluctuated between approximately 19.65x (Q4 2025) and 43.54x (Q1 2025); trading near the higher end of this band suggests the market is pricing in optimistic expectations for sustained margin performance and low execution risk, leaving little room for multiple expansion.
PE
27.0x
Latest Quarter
vs. Historical
Mid-Range
5-Year PE Range 17x~44x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
19.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: YUM's financial risk is primarily structural, not liquidity-based. The negative shareholder equity (Debt/Equity: -1.63) reflects an aggressive capital return policy via buybacks, creating a leveraged balance sheet that amplifies earnings volatility. While strong free cash flow ($1.64B TTM) and interest coverage (5.55x) provide a cushion, any sustained decline in royalty income could pressure its ability to service debt and maintain shareholder returns. Operationally, revenue concentration is a risk, with KFC and Taco Bell contributing over 80% of segment revenue, making overall growth highly dependent on the execution of these two mature brands in a competitive QSR landscape.
Market & Competitive Risks: The paramount market risk is valuation compression. Trading at a trailing P/E of 26.98x—a premium to both the sector and its own historical average—YUM is priced for perfection. A shift in market sentiment away from premium-priced defensive stocks, or a single earnings miss, could trigger a significant derating. Competitively, while its brands are iconic, the QSR space is intensely competitive, with constant pressure on value propositions and digital innovation. The stock's low beta (0.66) suggests it is less sensitive to market swings, but this also means it may not participate fully in market rallies, as seen in its recent underperformance versus the S&P 500.
Worst-Case Scenario: The worst-case scenario involves a combination of a severe consumer recession and rising costs pressuring franchisee profitability. This could lead to store closures, reduced royalty fees, and a failure to meet lofty growth expectations embedded in its valuation. A resultant earnings miss could trigger multiple compression toward the sector average P/E in the low 20s, coupled with a price decline to its strong technical support level. A realistic downside target would be a retest of the 52-week low of $137.33, representing a potential loss of approximately -16% from the current price of $162.79. A more severe bear case, incorporating analyst EPS low estimates, could see the stock fall further, but the $137 level represents a key historical support zone.
