Yum! Brands, Inc. (YUM - Free Report) is benefiting from robust same-store sales, Taco Bell’s growth and expansion efforts. Shares of the company have gained 7.8% in the past three months, compared with the industry’s increase of 3.9%. However, a rise in net costs and expenses remains a concern.
Growth Drivers
Despite the challenging environment, the company impressed investors with robust same-store sales growth in third-quarter 2022. The company reported consolidated same-store sales (excluding China) growth of 5%. During the quarter, same-store sales at Taco Bell, KFC and Pizza Hut rose 6%, 7% and 1% year over year, respectively.
Yum! Brands is benefiting from a recovery in emerging markets. Given the emphasis on consumer value proposition, expanded digital access and franchise partners, the company anticipates the momentum to continue.
The company is also benefiting from Taco Bell’s strong growth. Taco Bell recorded 98 gross new restaurant openings in third-quarter 2022. The company is focused on building momentum in different markets like the U.K., Spain and India. We expect Taco Bell’s revenues to increase 5.8% in 2022.
This Zacks Rank #3 (Hold) company is also focusing on expanding its footprint. During third-quarter 2022, the company opened 979 gross new units across 74 countries, including nearly 392 gross new units of Pizza Hut and 485 gross new units of KFC. Given the unit economics and a healthy development pipeline, the company anticipates achieving long-term growth of 4-5% in the upcoming periods.
Concerns
Increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs put significant pressure on the company’s margins. A competitive retail environment weighed on the restaurants’ costs. The company is susceptible to profit margin pressure due to relentless expansion. In third-quarter 2022, net costs and expenses amounted to $1,094 million from $1,079 million in the prior-year quarter. Costs associated with brand positioning in all key markets and ongoing investment initiatives are likely to weigh on margins in the near term.
Key Picks
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. (WING - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) .
Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 6.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.
Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have decreased 1.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels.
Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 11.8% in the past year.
The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.
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Yum! Brands, Inc. (YUM - Free Report) is benefiting from robust same-store sales, Taco Bell’s growth and expansion efforts. Shares of the company have gained 7.8% in the past three months, compared with the industry’s increase of 3.9%. However, a rise in net costs and expenses remains a concern.
Growth Drivers
Despite the challenging environment, the company impressed investors with robust same-store sales growth in third-quarter 2022. The company reported consolidated same-store sales (excluding China) growth of 5%. During the quarter, same-store sales at Taco Bell, KFC and Pizza Hut rose 6%, 7% and 1% year over year, respectively.
Yum! Brands is benefiting from a recovery in emerging markets. Given the emphasis on consumer value proposition, expanded digital access and franchise partners, the company anticipates the momentum to continue.
The company is also benefiting from Taco Bell’s strong growth. Taco Bell recorded 98 gross new restaurant openings in third-quarter 2022. The company is focused on building momentum in different markets like the U.K., Spain and India. We expect Taco Bell’s revenues to increase 5.8% in 2022.
This Zacks Rank #3 (Hold) company is also focusing on expanding its footprint. During third-quarter 2022, the company opened 979 gross new units across 74 countries, including nearly 392 gross new units of Pizza Hut and 485 gross new units of KFC. Given the unit economics and a healthy development pipeline, the company anticipates achieving long-term growth of 4-5% in the upcoming periods.
Concerns
Increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs put significant pressure on the company’s margins. A competitive retail environment weighed on the restaurants’ costs. The company is susceptible to profit margin pressure due to relentless expansion. In third-quarter 2022, net costs and expenses amounted to $1,094 million from $1,079 million in the prior-year quarter. Costs associated with brand positioning in all key markets and ongoing investment initiatives are likely to weigh on margins in the near term.
Key Picks
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. (WING - Free Report) , Chuy's Holdings, Inc. (CHUY - Free Report) and Chipotle Mexican Grill, Inc. (CMG - Free Report) .
Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 6.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.
Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have decreased 1.7% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels.
Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 11.8% in the past year.
The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.
Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry
Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in? If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.
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