Yum! Brands demonstrated impressive performance with sales soaring 16% while its digital transformation continues to drive value: digital sales climbed 15% and surpassed 50% of total revenue.
Despite challenges such as the closure of franchised locations in Turkey, the company’s expansion strategy remains strong with 1,804 units opened in the most recent quarter.
Popular brands and growth potential make the current valuation attractive. The stock trades at 25.8 times the company’s forward earnings forecast, a reasonable multiple when it projects continued strong earnings growth.
YUM! BRANDS INC. (New York symbol YUM) operates over 60,000 restaurants in more than 155 countries. Its main banners are KFC (fried chicken), Pizza Hut and Taco Bell (Mexican food). Franchisees now operate 98% of outlets.
Yum has terminated its franchise agreement with IS Gida A.S., which operates 83 KFC restaurants and 254 Pizza Hut restaurants in Turkey. As a result, it will temporarily shut these locations. The company has also re-acquired IS Gida’s franchise rights in Germany for KFC and Pizza Hut.
The company took this action due to specific issues with this operator—sales in Turkey were significantly below Yum’s global average sales per restaurant.
Yum recorded a $60 million charge against its earnings for the fourth quarter of 2024. The company expects the closures of the Turkish locations will have little impact on its 2025 earnings.
[ofie_ad]
Growth Stocks: Yum! Brands’ digital sales continue to spur growth
Yum! Brands reported strong results for the fourth quarter ended December 31, 2024. The company’s revenue rose 16.0%, to $2.36 billion from $2.04 billion. KFC’s same-store sales were unchanged and Pizza Hut same-store sales fell 1%. Notably, though, Taco Bell U.S. delivered impressive same-store sales growth of 5%. Per-share earnings climbed 27.8%, to $1.61 from $1.26.
In 2024, Yum opened 4,535 new stores across more than 100 countries.
Despite the current economic uncertainty, the company keeps opening open new stores. It also continues to develop new menu items and expand its digital ordering platforms. As a result, Yum’s earnings for all of 2025 are forecast at $6.01 a share. The stock trades at 25.8 times that estimate, which is a reasonable p/e in light of Yum’s popular brands.
The company is raising its quarterly dividend by 6.0% with the March 2025 payment, to $0.71 from $0.67. The shares now yield 1.8%.
The company’s digital transformation continued to be a key value driver, with digital sales growing about 15% and surpassing 50% of total sales. Yum also announced the launch of Byte by Yum!, its proprietary Software as a Service (SaaS) digital ecosystem, currently used by 25,000 restaurants.
Recommendation in Wall Street Stock Forecaster: Yum Brands Inc. is a buy for aggressive investors.
