Yum! Brands (YUM) is seeing improving visibility as Taco Bell stays strong, KFC remains steady, store openings improve and Pizza Hut explores strategic options, with estimates moving slightly higher, Morgan Stanley said in a note Friday.
Taco Bell remains the main driver, with same-store sales up 8%, showing continued demand despite tough comparisons from a year earlier, and could get more support from beverage growth, especially if the company expands Live Mas Cafe drinks to more locations, the investment firm said.
Morgan Stanley said KFC is still broadly on track, helped by international momentum and new beverage efforts through the Kwench platform; however, Pizza Hut remains weak in the US, but flat same-store sales were seen as better than expected, while its strategic review is expected to finish by year-end.
Unit growth is moving closer to the company's long-term target, supported by KFC openings and fewer Pizza Hut closures than expected, according to the note.
Morgan Stanley maintained its equal-weight rating on the stock and raised its price target to $180 from $176, reflecting slightly higher estimates, while noting some margin pressures and macroeconomic uncertainty.
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