Shares of Yum! Brands Inc (NYSE:YUM) rallied in early trading on Wednesday, after the company reported its third-quarter results.
Following the sale of Pizza Hut, the company is sharpening its focus on Taco Bell’s same-store sales momentum and KFC’s international footprint expansion, according to TD Cowen.
The Yum! Brands Analyst: Andrew Charles maintained a Buy rating and raised the price target from $177 to $180.
The Yum! Brands Thesis: Taco Bell’s same store sales have improved so far in the fourth quarter, Charles said in the note.
Check out other analyst stock ratings.
Taco Bell’s same-store sales improved from a 1% decline in the first four weeks to 3% growth in the following four weeks, the analyst stated.
Charles lowered the estimate for Taco Bell’s fourth-quarter same-store sales from 3% to 2.5%. This embeds an expected 4% same-store sales growth in the final eight weeks of the quarter, he noted.
The recovery is backed by innovative menu offerings, creative marketing, and sharp price-point value, the analyst said.
"We are encouraged to learn that 4Q marketing spend is not benefiting from a reallocation of 3Q’s spend that we argue makes the improvement more organic," he further wrote.
The analyst cut KFC Global same-store sales to 1% for the fourth quarter, from the earlier projection of 2%, reflecting the miss reported in the third quarter.
"Within 4Q KFC company margins, management expects ~$3M margin drag from 15 Saucy locations to persist into forward quarters, leading us to embed -1% RLM contraction in 4Q26-2Q27 at 11.8%, 9.2% and 11.0%," he wrote.
Portfolio net restaurant growth (ex-Pizza Hut) is projected at 6.4% for 2026 and at 6.3% for 2027, supported by strong KFC international development, Charles stated.
Despite negative third-quarter comps in the US and China, overall global store expansion remains stable, he further noted.
YUM Price Action: Shares of Yum! Brands had risen by 3.68% to $162.79 at the time of publication on Wednesday.
Image: Shutterstock