YUM Analyst Meeting Highlights… and Our Thoughts

By Mark Kalinowski Published on December 5, 2018 at 12:00 AM

Earlier today, Yum Brands (YUM; Buy) hosted an Analyst Meeting in New York City. The theme was “A World of Opportunities,” which highlights the global opportunities for the company’s KFC, Pizza Hut, and Taco Bell brands. Management says it wants all three brands to be distinctive, relevant, and easy brands. Going forward, management also indicates that collaboration amongst the brands will increase in importance, with management saying “our ability to collaborate will set us apart from our competitors.” This will be a positive if it can come to fruition, but for those on the Street — and we have been amongst them — who believe value can be unlocked by separating out one or more of Yum’s brands, management seems more dead set against that path than ever. Management states that there’s “simply no other restaurant company or retailer in the world like us,” and that “we’ve done from a mindset of being equity operators to being brand builders.” Management adds that “the four growth drivers drive same-store sales, they drive new unit growth, they drive system sales.” Those four growth drivers are: (1) distinctive, relevant, and easy brands, (2) unrivaled culture and talent, (3) bold restaurant development, and (4) unmatched franchise operating capability. We reiterate our Buy rating on YUM and note the following:

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CAKE Our Meeting with Management in Calabasas

By Mark Kalinowski Published on December 4, 2018 at 12:00 AM

We recently met with The Cheesecake Factory (CAKE; Neutral) — including CFO Matthew Clark; Senior Director, Investor Relations Stacy Feit; and Senior Financial Analyst, Investor Relations Heather Livingston — in Calabasas, California. We thank them for their time! Topics of interest that we asked about include North Italia (an acquisition of which could transform the company quite meaningfully) and wage inflation (particularly important for a company which owns and operates 100% of its U.S. restaurants). We maintain our Neutral rating on CAKE, and note the following:

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YUM (Post-Call) Spooky Good Taco Bell SameStore Sales Growth of +5%

By Mark Kalinowski Published on October 31, 2018 at 12:00 AM

Earlier today, Yum Brands (YUM; Buy) reported adjusted Q3 EPS of $1.04, exceeding our $0.83 forecast and sell-side consensus of $0.83. However, this $1.04 figure includes a $0.22 boost from an update in the fair value of Yum’s investment in GrubHub (GRUB; Not Rated), which led to $94 million of pre-tax investment income. Excluding this $0.22 boost, adjusted Q3 EPS would have been $0.82, one cent below our forecast and consensus. We do note that G&A/Revenues of 14.7% were higher than our 14.4% estimate.

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