In a recent conference call with reporters, Brian Niccol, Taco Bell’s coon-to-be CEO said,

“People are not looking for diet food. What they are looking for is food that gives them energy, food that’s going to give them freshness, food that’s going to give them the protein.”

With the new crave in protein shakes and the growing popularity of Greek yogurt, Niccol is on to something. But protein, which includes steak, chicken and pork, is not cheap.

Chipotle has had to raise its menu prices to offset the rising costs of beef and chicken. McDonald's (MCD), which once seemed impervious to such macro issues, decided to remove its Angus third-pounder from its menu. McDonald's saw no cost-benefit in selling the burgers that didn't grow the bottom line.

That won't be the case for Taco Bell.

The Cantina Power Menu, which will offer double portions of meat, will be priced at $3.79 for a chicken burrito and $5.19 for a steak bowl. Both are more expensive than items on Taco Bell's regular menu. At the same time, these are cheaper than buying at Chipotle, whose comparable menu items have always been priced at a premium. But Chipotle is growing revenue at a 24% rate and delivering 37% in gross margin.

Yum!, which is double the size of Chipotle, won't need that level of growth to deliver the sort of profits to drive the stock higher. In the April quarter, Yum! delivered a 24% jump in profits on just 8% year-over-year revenue growth. And that was with a weak performance at Taco Bell.

It remains to be seen how quickly the protein menu takes off. We'll find out one way or another -- either through Yum!'s results or Chipotle's. Granted Chipotle has aggressive store expansion plans but its restaurant aren't yet everywhere.

Yum!, on the other hand, which benefits from its dual restaurant concept (e.g. Taco Bell sharing restaurant space with KFC), can reach more people in more ways.. In either case, I can't bet against Yum! The food's delicious and, unlike Chipotle, Yum!'s stock is still cheap.

At the time of publication, the author held no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

TheStreet Ratings team rates YUM BRANDS INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate YUM BRANDS INC (YUM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, increase in stock price during the past year, increase in net income, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.3%. Since the same quarter one year prior, revenues slightly increased by 7.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Hotels, Restaurants & Leisure industry average. The net income increased by 18.4% when compared to the same quarter one year prior, going from $337.00 million to $399.00 million.
  • Net operating cash flow has increased to $570.00 million or 42.14% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -3.17%.
  • 37.19% is the gross profit margin for YUM BRANDS INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 14.64% trails the industry average.

If you liked this article you might like

Pizza Hut to Deliver 15 Degrees Hotter Pizza on National Pepperoni Pizza Day

Taco Bell Opening 300 Locations That Have No Drive-Thru But Sell Lots of Alcohol

Equifax CEO and Board Are Pretty Cozy

Alibaba Gets in On Apple's Facial Recognition Thing

Walmart, Starbucks Respond to Hurricanes the Best -- Others? Not So Much