NEW YORK (TheStreet) -- Yum! Brands (YUM) shares are up 0.7% to $74.49 in early market trading after the Taco Bell and Pizza Hut restaurant operator was upgraded to "buy" from "neutral" by analysts at Janney Capital on Thursday.
The firm also raised the company's price target to $88 from $68, which represents a potential upside of 19% from the stock's previous closing price of $73.97.
Analysts at the firm made a value call on the company saying that as the brunt of its issues with meat safety in China subside, the stock's upside will increases. Yum! Brands was caught in the same food safety scandal that McDonalds (MCD) was earlier this year after Chinese inspectors discovered one of their meat suppliers was using tainted meat.
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 number of 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 compelling growth in net income, reasonable valuation levels, notable return on equity, impressive record of earnings per share growth and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry. The net income increased by 165.8% when compared to the same quarter one year prior, rising from $152.00 million to $404.00 million.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Hotels, Restaurants & Leisure industry and the overall market on the basis of return on equity, YUM BRANDS INC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- YUM BRANDS INC reported significant earnings per share improvement 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 ($3.22 versus $2.36).
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 9.4%. Since the same quarter one year prior, revenues slightly dropped by 3.2%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- You can view the full analysis from the report here: YUM Ratings Report