By Peet Serfontein & Khumbulani Kunene
Yum! Brands Inc. is an American fast-food company that operates some of the world's most recognisable restaurant chains including KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill. Headquartered in Louisville, Kentucky, the company was formed in 1997 as a spinoff from PepsiCo. It derives most of its revenue from franchise fees and royalties, which has enabled rapid expansion while minimising costs.
Despite tough competition from giants like McDonald's and Restaurant Brands International, the company continues to adapt to shifting consumer trends, driving growth through delivery services, technology integrations, and value-based menu options that resonate with a wide array of customers.
Technically, a period of low volatility is of interest, as it highlights market stability, reducing the likelihood of disruptive selling pressure. Low volatility can imply consolidation, where investors accumulate shares within a narrow price range, often referred to as a "base", which signals the stock is forming a solid foundation for an upward move as it reflects a period of equilibrium prior to a potential breakout. Low volatility can also attract institutional investors as stability makes it easier for large investors to accumulate positions without drastically increasing prices.
The appearance of a green Heikin-Ashi candle supports the bullish outlook as it signals sustained upward momentum and a potential trend reversal. A green Heikin-Ashi candle, especially one with no lower shadow (or wick), suggests strong bullish momentum, indicating that buyers are consistently pushing prices up without allowing sellers to lower them.
The stock remains above its 200-day simple moving average (SMA) of $134.98. This suggests that the longer-term trend is still positive, which is encouraging.
The forward calculations of the Relative Strength Index indicator suggests that the stock will be overbought at ~$190, making our profit target realistic.
Share Information
| Share Code | YUM US |
|---|---|
| Industry | Consumer Services |
| Market Capital (USD) | 37.7 billion |
| One Year Total Return | 13.97% |
| Return Year-to-Date | 4.06% |
| Current Price (USD) | 133.97 |
| 52 Week High (USD) | 143.20 |
| 52 Week Low (USD) | 119.26 |
| Financial Year End | December |
| Over the past 12 months the company's share price has achieved double-digit growth, although year-to-date returns have been more muted. | |
Consensus expectations
(Bloomberg)
| FY23 | FY24E | FY25E | FY26E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 5.17 | 5.63 | 6.25 | 7.01 |
| Growth (%) | 8.82 | 11.11 | 12.17 | |
| Dividend Per Share (USD) | 2.42 | 2.66 | 2.83 | 3.17 |
| Growth (%) | 10.04 | 6.12 | 12.14 | |
| Forward PE (times) | 21.80 | 19.46 | 19.11 | |
| Forward Dividend Yield (%) | 1.99 | 2.11 | 2.37 | |
| In FY23, the company saw good growth in the top-line and bottom-line number. Earnings is expected to record double-digit growth in the medium term. | ||||
Buy/Sell Rationale
Technical Analysis:
Long term Fundamental view:
| Share Name and Position | AVY US - Exit the trade (Close the position) |
ABSI US - Buy (Continue to hold) |
C US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 212.51 | 3.79 | 61.71 |
| Current | 206.19 | 4.17 | 64.69 |
| Movement | -3.0% | +10.0% | +4.8% |
| We suggest exiting the trade amid weakening technicals. |
A developing inverted head and shoulders pattern remains of interest. Remains below its 200-day simple moving average (SMA). Subdued downside momentum is supportive.
Our profit target is $5.50, with a trailing stop-loss at $3.50. Exit the trade by 7 November 2024. |
A price at the confluence of the 200-day, 200-week and 200-month SMAs remains of interest. Remains above its 200-day SMA and fading downside momentum is supportive.
Our profit target is $71.00 with a trailing stop-loss at $61.00. Exit the trade by 3 January 2025. |
| Share Name and Position | WM US (Continue to hold) |
ABNB US (Continue to hold) |
APH US (Continue to hold) |
|---|---|---|---|
| Entry | 209.09 | 132.50 | 66.85 |
| Current | 219.11 | 137.78 | 68.88 |
| Movement | +4.8% | +4.0% | +3.0% |
|
A price that gave a second "buy" signal since 2022 according to the Bollinger Bands remains of interest. Remains above its 200-day SMA and the start of upside momentum is supportive.
Our profit target is $227.00, with a trailing stop-loss at $212.00. Exit the trade by 27 December 2024. |
A price in a developing upward channel pattern remains of interest. Remains just below its 200-day SMA, and upside momentum supports the trade strategy.
Our profit target is $153.00, with a trailing stop-loss at $129.40. Exit the trade by 11 December 2024. |
A developing bullish flag pattern remains of interest. Remains above its 200-day SMA. Fading upside momentum is concerning.
Our profit target is $76.00, with a trailing stop-loss at $64.80. Exit the trade by 29 January 2025. |
FNB Stockbroking and Portfolio Management (Pty) Ltd, a subsidiary of FirstRand Bank Limited, an authorised Financial Services Provider and authorised user of the JSE limited (Reg no: 1996/011732/07). This Publication note is issued by FNB Stockbroking and Portfolio Management (Pty) Ltd for the information of clients only and should not be produced in whole or part without prior permission. Although FNB Stockbroking and Portfolio Management (Pty) Ltd is an Authorised Financial Services Provider, any opinions and/or analysis contained in this Publication are for informational purposes only and should not be considered advice, including but not limited to financial, legal or tax advice, or a recommendation to invest in any security or to adopt any investment strategy. The information contained herein has been obtained from sources/persons which we believe to be reliable but is not guaranteed for correctness, completeness or otherwise and we do not assume liability for loss arising from errors in the information or that may be suffered from using or relying on the information contained herein irrespective of whether there has been any negligence by us, our affiliates or any other employees of us, and whether such losses be direct or consequential. As market and economic conditions are subject to rapid change, any comments, opinions, and analysis is rendered as of the date of publishing and may change without notice. Such changes may have a material impact on the outcome of any investment. Securities involve a degree of risk and are volatile instruments. Past performance is not indicative of future performances. Securities or financial instruments mentioned in the Publication note may not be suitable for all investors and FNB Stockbroking and Portfolio Management (Pty) Ltd has bares no responsibility whatsoever arising from or as a consequence hereof. The material is not intended as a complete analysis of every material fact regarding any share, instrument, sector, region, market, country, investment, or strategy. The recipient of this Publication must make their own investment decision and is advised to contact his relationship manager for a personal financial analysis prior to making any investment decisions. Copyright 2018 by FNB Stockbroking and Portfolio Management (Pty) Ltd.
