Last Update 03 Dec 25

YUM: Future Pizza Hut Exit And Taco Bell Strength Will Unlock Outperformance

Analysts have nudged their average price target for Yum! Brands modestly higher toward the mid $160s, reflecting increased confidence in Taco Bell driven growth and potential portfolio optimization, such as a Pizza Hut sale, partly offset by concerns around higher costs and mixed same store sales trends.

Analyst Commentary

Recent Street research reflects a more constructive stance on Yum, with multiple firms lifting price targets into the mid to high $150s and one upgrade to a Buy rating, even as others trim estimates and highlight cost and traffic risks.

Bullish Takeaways

Bullish analysts view the potential sale of Pizza Hut as a catalyst that could sharpen management focus on higher growth banners and support a faster, more capital efficient development pipeline.
Stronger Taco Bell same store sales, supported by mobile location data and recent unit acquisitions, are seen as a key driver of accelerating earnings growth and multiple support.
Some see the current share price as offering favorable risk reward, arguing that the worst of development headwinds have passed and that Yum can deliver Taco Bell comps above consensus into 2026 and beyond.
The raising of price targets despite macro uncertainty suggests confidence that resilient top line trends at core brands can sustain a premium valuation relative to the broader restaurant group.

Bearish Takeaways

Bearish analysts highlight persistent softness at Pizza Hut and slower comps across parts of the portfolio, which could cap earnings revisions and limit upside to the valuation multiple.
Elevated beef and other input costs, particularly at Taco Bell, are expected to pressure margins and partly offset the benefit of stronger sales trends.
Some see net EPS upside as constrained, with higher G&A and interest expense dampening the impact of unit growth and SRS momentum on overall profit growth.
With expectations already high for Taco Bell and KFC International, more cautious views argue that the current stock price reflects much of the long term growth story, leaving a more balanced risk reward profile.

What's in the News

Yum! Brands has launched a formal strategic review of options for its Pizza Hut brand, signaling the possibility of a separation or other transaction as it seeks to unlock value for shareholders while the chain continues normal operations during the process.
The company updated investors on its share repurchase activity, disclosing that it has completed buybacks totaling approximately 5.46 million shares, or about 1.95% of shares outstanding, for $762.2 million under the existing authorization.
Yum! Brands amended and restated its bylaws to change how shareholders can request a special meeting, now requiring a preliminary request for the Board to set a record date, along with other technical and conforming updates.
Optimus Energy Solutions and Yum! Brands announced a partnership to roll out DC Fast EV charging stations at Saucy locations starting in Central Florida in 2025, with plans for a broader national deployment over time.
Ranjith Roy has been appointed Chief Financial Officer effective October 1, 2025, as part of a leadership transition that coincides with Chris Turner’s move into the Chief Executive Officer role.
President Trump is expected to cut tariffs on key food inputs including beef and coffee, a move that could ease cost pressures across restaurant chains such as Yum! Brands if implemented as described (Bloomberg).

Valuation Changes

Fair Value: unchanged at $165.56 per share, indicating no shift in the intrinsic value estimate.
Discount Rate: risen slightly from 9.01% to 9.06%, reflecting a modest increase in the assumed cost of capital.
Revenue Growth: increased slightly from 6.86% to 7.21%, implying a marginally more optimistic long term sales outlook.
Net Profit Margin: edged up from 21.09% to 21.14%, suggesting a small improvement in expected profitability.
Future P/E: eased slightly from 28.22x to 27.92x, indicating a modest reduction in the valuation multiple applied to forward earnings.

Rapid digital transformation and asset-light franchising strengthen efficiency, profitability, and customer loyalty while supporting resilient cash flows and global expansion.
Strategic international growth and affordable menu innovation target rising global demand, driving market diversity and steady long-term earnings.
Dependence on international markets, slow brand innovation, digital investment risks, and limited franchise control leave Yum! vulnerable to revenue volatility and shifting consumer preferences.

Catalysts

About Yum! Brands

Develops, operates, and franchises quick service restaurants worldwide.What are the underlying business or industry changes driving this perspective?

The rapid acceleration and global rollout of Yum!'s Byte digital platform-including AI-driven marketing, operational automation, and proprietary ordering/delivery solutions-positions the company to capture higher transaction volumes, expand check sizes, and enhance customer loyalty, driving both top-line revenue growth and improving net margins over the long term.
Aggressive international unit growth, especially in emerging and high-growth markets (China, India, Europe, East Asia) where rising urbanization and a growing middle class are boosting demand for branded, convenient food options, underpins a larger addressable market, sustained system sales growth, and enhanced geographic diversification-contributing to long-term revenue and earnings expansion.
The increasing digital mix (now at 57%, with significant year-over-year gains) and expansion of direct-to-consumer channels are expected to support greater efficiency, improved order accuracy, and higher-margin sales, ultimately benefiting net margin and free cash flow over time as digital penetration continues to rise.
Strategic focus on affordable, value-driven menu innovations and targeted offerings (such as value menus and new beverage platforms) enables Yum! Brands to capture value-conscious consumers amid economic uncertainty and competitive pressure, supporting resilient same-store sales and stable earnings growth.
The asset-light, heavily franchised operating model minimizes capital intensity and allows for recurring, predictable cash flows while enabling rapid global expansion-with improved franchisee economics via proprietary tech (Byte) further supporting long-term operating profit and EPS growth.

Yum! Brands Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Yum! Brands's revenue will grow by 6.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 18.1% today to 21.4% in 3 years time.
Analysts expect earnings to reach $2.0 billion (and earnings per share of $7.86) by about September 2028, up from $1.4 billion today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.6x on those 2028 earnings, down from 28.2x today. This future PE is greater than the current PE for the US Hospitality industry at 23.9x.
Analysts expect the number of shares outstanding to decline by 0.55% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.25%, as per the Simply Wall St company report.

Yum! Brands Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing softness in consumer demand in several markets, particularly Habit Burger and underperforming KFC and Pizza Hut regions (U.S. and Europe), highlights Yum!'s vulnerability to shifting consumer preferences and value perceptions; if these challenges persist, they may weigh on revenue growth and same-store sales increases.
The sharp focus on digital, AI, and tech platform investments (e.g., Byte rollouts, AI-driven marketing, and app development) requires significant up-front costs, and there is uncertainty about whether the pace of adoption and consumer engagement will translate to sufficient revenue and operating margin improvement to offset those costs in the long run.
KFC International generates the majority of divisional operating profit, leaving Yum! exposed to geopolitical instability, currency fluctuations, and regulatory risk in international markets-any adverse developments could increase revenue volatility and negatively impact earnings predictability.
There are continued risks that legacy brands (especially KFC and Pizza Hut) may not innovate quickly enough to meet rapid changes in consumer expectations around health, sustainability, or menu differentiation, potentially leading to stagnant or declining transaction volumes and slower revenue growth relative to more agile quick-service competitors.
The asset-light, franchise-dominant model limits Yum!'s direct operational control, raising the risk of inconsistent execution on brand standards or value propositions across franchisees worldwide, which could erode brand equity, compress net margins, and impact systemwide revenue.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $158.522 for Yum! Brands based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $185.0, and the most bearish reporting a price target of just $142.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $9.5 billion, earnings will come to $2.0 billion, and it would be trading on a PE ratio of 27.6x, assuming you use a discount rate of 9.2%.
Given the current share price of $145.78, the analyst price target of $158.52 is 8.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

YUM: Upcoming Earnings and Segment Performance Will Define Near-Term Trajectory