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YUM

Yum! Brands

$86.70

0.54 (0.63%)

10:58
10/19/16
10/19
10:58
10/19/16
10:58

Credit Suisse upgrades Yum on positive outlook outside of China

Credit Suisse upgraded Yum! Brands (YUM) to Outperform from Neutral, citing what it sees as a "compelling" long-term outlook for the company's non-China business. Yum is slated to spin off its China business into a separately traded franchisee on November 1. Its current stock will primarily track the value of its non-China business, although Yum will receive a 3% royalty from its Chinese franchisee. 'NEW YUM' POISED TO JUMP: Referring to Yum's non-China business as "New Yum," Credit Suisse analyst Jason West estimates that New Yum's stock can surge to $80 or higher by the end of 2018, up from $62 in the when issued market as of yesterday. NEW YUM'S POSITIVES: Among New Yum's positive attributes are a "balanced portfolio across brands/geographies and relatively low sensitivity to SSS and cost inputs," wrote West. Moreover, at its Investor Day on October 11, Yum announced that it would seek to franchise 98% of New Yum's stores by the end of 2018, versus its previous goal of a 96% franchise rate by the end of 2017, West reported. Refranchising will enable New Yum to lower its general and administrative costs, as well as its capital expenditures, causing its free cash flow to exceed $1B by 2018, the analyst stated. New Yum's 2018 free cash flow will "nearly equal" the original company's 2016 free cash flow, despite the spin off of the China business, West noted. Boosted by share buybacks and dividends, New Yum's bottom line should jump about 40% in 2018 versus 2017, added West. NEAR-TERM VALUATION: New Yum will be worth about $68 in 2017, while Yum China's value will be about $28, based on a sum of the parts model, West estimated. Consequently, he set a $96 price target on Yum's current stock, up from $90 previously. PRICE ACTION: In morning trading, Yum! Brands shares rose 0.7% to $86.72.

YUM Yum! Brands
$86.70

0.54 (0.63%)

10/12/16
OPCO
10/12/16
NO CHANGE
OPCO
Outperform
Oppenheimer remains a buyer of Yum! Brands ahead of split
Oppenheimer analyst Brian Bittner believes the case to own Yum! Brands into the November 1st split just improved after the company's analyst day. Bittner says new-Yum! Brands' business model resembles scarcity, possesses a unique cost-cutting opportunity and should reliably return significant capital to shareholders, while Yum-China's runway for profit growth is substantial and appears underappreciated based on the current stock price. He reiterates an Outperform rating and $97 price target on the shares.
10/19/16
FBCO
10/19/16
UPGRADE
FBCO
Outperform
Yum! Brands upgraded to Outperform from Neutral at Credit Suisse
10/19/16
10/19/16
UPGRADE
Target $96

Outperform
Yum! Brands upgraded to Outperform on 'New Yum' outlook at Credit Suisse
As previously reported, Credit Suisse analyst Jason West upgraded Yum! Brands to Outperform from Neutral and raised its price target to $96 from $90 based on a bullish outlook for the "New Yum" non-China, which will begin to trade on a standalone basis on November 1. The analyst sees a base case stock price for the New Yum in the $80+ range by mid-to-late 2018 led by a multiyear earnings growth story driven by accelerating new store growth and tremendous excess capital.
10/19/16
10/19/16
UPGRADE

On The Fly: Top five analyst upgrades
Catch up on today's top five analyst upgrades with this list compiled by The Fly: 1. Twitter (TWTR) upgraded to Hold from Sell at Loop Capital with analyst Blake Harper saying downside is limited, even if the Q3 results disappoint, as there is "essentially a floor on the value of shares given the M&A speculation." 2. Costco (COST) upgraded to Buy from Neutral at Northcoast with analyst Chuck Cerankosky saying he expects a stronger earnings improvement in 2018 and believes the performance will reflect a $5 membership increase in the US and Canada. 3. Yum! Brands (YUM) upgraded to Outperform from Neutral at Credit Suisse with analyst Jason West citing a bullish outlook for the "New Yum" non-China, which will begin to trade on a standalone basis on November 1. 4. America's Car-Mart (CRMT) upgraded to Buy from Underperform at BofA/Merrill with analyst Elizabeth Suzuki saying she believes competition in the subprime auto market is beginning to ease and said she is seeing signs of credit tightening at other subprime lenders which should benefit Car-Mart. 5. Alon USA Partners (ALDW) and Western Refining (WNR) upgraded to Buy from Neutral at Citi. This list is just a portion of The Fly's full analyst coverage. To see The Fly's full Street Research coverage, click here.

TODAY'S FREE FLY STORIES

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BDC

Belden

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FLO

Flowers Foods

$19.26

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HAL

Halliburton

$54.22

-0.21 (-0.39%)

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  • 23

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BIIB

Biogen

$289.54

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VLO

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SKLN

Skyline Medical

$2.94

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FLO

Flowers Foods

$19.10

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WBA

Walgreens Boots Alliance

$84.28

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BAS

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$NYE

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XLF

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, XLK

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15:05
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FEYE

FireEye

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BAS

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SYY

Sysco

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