Jefferies Raises Yum! Brands Price Target

Jefferies raised its price target on Yum! Brands, Inc. (NYSE: YUM) Friday from $67 to $72 and maintained a Hold rating.

Analysts led by Andy Barish noted that the long-term “model remains intact, but YUM clarified ’15 EPS guide excludes op profit growth in KFC China given low visibility. 1H China SSS will be down, but management sees a turnaround as KFC drives menu innovation, a more localized strategy & increases franchising.”

Barish commented that “KFC China recovery could drive upside. We'll see rest-level margin erode to ~15 percent this year on the China SSS declines, and though sales are improving m/m, YUM does not expect positive comps until 2H15...KFC, now with some new leadership, will be making aggressive moves to reclaim share in '15.”

The analyst note claimed that the rest of the business is on track but it doesn’t drive the stock. “TB continues to innovate across dayparts (breakfast) & digital (mobile ordering) as the brand moves toward its $14B system sales goal by 2022. At PH, the US just kicked off its relaunch (flavor & digital), and global devel is accelerating, led by delivery.”

Barish concluded, “While YUM is moving in the right direction, we suspect investors may be disappointed by the lack of strategic/balance sheet actions. We estimate ‘14/15/16 EPS of $3.10/3.48/4.00 (from $3.20/$3.62/NE).”

Yum! Brands recently traded at $73.28, up 1.75 percent.