Is YUM! Brands Forging Forward In A Choppy Market?

The S&P 500 had its worst day in nearly a month on Thursday, losing 2.5% overall due to a rapid rise in bond yields. While the larger market is still grappling with the resulting choppiness, one brand in particular made strides toward future gains: Yum! Brands.

Yum! Brands, Inc (YUM) ticked up 0.02% on Thursday to $104.70 on volume over 1.75 million shares. The last month for Yum! has been choppy but constrained, with the 22-day price average falling at $104.12. YTD, the stock is down 0.59% – but that may be about to change soon.

The fast-food industry overall has fared better than larger, more expensive sit-down restaurants in the last year. Whereas “real” restaurants have struggled to stay afloat in the wake of social distancing restrictions and a depressed economy, fast food joints have been serving up cheap-and-easy options through the (socially distanced) drive-thru window for decades now.

Yum! Brands, based in Louisville, Kentucky, is one of the largest fast-food companies in the world, with over 50,000 restaurants in 150 countries and territories. As the owner of brands like KFC, Taco Bell, and Pizza Hut, they’re masters of inexpensive and socially distanced dining experiences.

And now, they’re preparing to expand their menu with a new line of protein-based foods from Beyond Meat.

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Yum! Brands Takes Us Beyond

In a major distribution agreement inked on Thursday between Beyond Meat and Yum! Brands, the two companies promised to bring a “craveable and innovative” new menu items to Yum!’s holdings. (Beyond Meat also penned a separate, unrelated agreement with McDonald’s on the same day. Financial terms were not disclosed in either deal.)

Yum! Brands called Thursday’s agreement an “expansion of the companies’ growing track record of collaborations” with alternative food developers. Already, Yum! has tested plant-based chicken in a handful of Canadian KFC locations, while Pizza Hut has trialed a “Beyond Italian Sausage” pizza. And with this new deal in pace, Yum! plans to expand its offerings to include protein-packed items such as chicken alternatives, pizza toppings, and even taco fillings.

A Quick Peek at the Balance Sheet

Before we get too excited about the future of plant-based foods, let’s reign in our enthusiasm and look at Yum! Brands’ financial performance in the last year.

As a result of the pandemic, their numbers have dropped across the board against their three-year marks, with revenue falling from $5.69 billion to $5.65 billion. Their operating income has taken a small hit as a result, dropping from $1.763 billion to $1.762 billion. And the same time, their EPS has slashed from $4.69 to $2.94 in per-share earnings.

But if this plant-based deal has reminded us of anything (other than juicy, vegetarian-friendly burgers), it’s that there’s plenty to feel optimistic about: Yum! is trading with a forward 12-month P/E of 26.24.

What Does Q.ai’s AI Have to Say?

Of course, now it’s time to talk about why you’re here: You want to know if Yum! Brands is a good investment for your future. And according to our AI, the answer is yes.

While Yum! Brands Inc rated an F in Technicals according to our AI, their other metrics performed better, with C’s in Growth and Quality Value and an A in Low Volatility Momentum. As a result of their performance, surprisingly dimmed financial losses in the wake of an unprecedented year, and the impending future of plant-based foods, Yum! Brands is rated Attractive for the month of February.

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