Why Yum! Brands (YUM) Stock Is Slipping Today

NEW YORK (TheStreet) -- Shares of Yum! Brands, Inc.  (YUM)  are down -1.39% to $70.49 in early market trading after analysts at UBS  (UBS) lowered its price target to $85 from $90 on the restaurant company while maintaining a "buy" rating.

The firm said the lowered price target reflects the worse than feared China supplier issue for Yum! Brands, the parent company of KFC, Pizza Hut and Taco Bell.

UBS said long term prospects for global unit expansion remain intact, so therefore, it will maintain its "buy" rating on the stock.

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

"We rate YUM BRANDS INC (YUM) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, good cash flow from operations, increase in net income and growth in earnings per share. 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 5.5%. Since the same quarter one year prior, revenues rose by 10.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 18.9% when compared to the same quarter one year prior, going from $281.00 million to $334.00 million.
  • Net operating cash flow has significantly increased by 56.70% to $514.00 million when compared to the same quarter last year. In addition, YUM BRANDS INC has also vastly surpassed the industry average cash flow growth rate of -5.13%.
  • YUM BRANDS INC has improved earnings per share by 19.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, YUM BRANDS INC reported lower earnings of $2.36 versus $3.37 in the prior year. This year, the market expects an improvement in earnings ($3.58 versus $2.36).
  • You can view the full analysis from the report here: YUM Ratings Report

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