Yum! Brands ( NYSE: YUM ) should offer a solid earnings result on Wednesday, according to Baird analyst David Tarantino.
He told clients that global comparable sales could come in above low-estimates despite struggles in China. Taco Bell in particular is expected to see stronger sales than Wall Street consensus estimates project.
Data analytics firm Placer.ai added to positive indications on Taco Bell foot traffic, pointing to one key menu item as a driver for the close of the third quarter.
"On September 15th, 2022 Taco Bell relaunched the Mexican Pizza for a second time and year-over-year weekly visits to the chain grew by 6.1%," a report released on Monday noted. "Since the Mexican Pizza relaunch, Taco Bell has sustained weekly YoY foot traffic growth. The chain has also outperformed weekly YoY visits for the QSR industry nearly every week – excluding the week of October 3rd when the release of McDonald’s adult Happy Meal skewed the industry average."
Baird also expects KFC to show strong traffic in the quarter, making up for the expectation of a small contraction for Pizza Hut against difficult comps.
“We expect the upcoming Q3 report to be largely satisfactory, and we believe YUM's portfolio is well positioned to continue delivering good fundamental performance in a range of economic scenarios,” Tarantino wrote. “Based on this outlook and our favorable view of the company's capital-efficient growth model, we view the risk/reward on the stock as attractive at current valuation levels.”
He added that the chain is well-positioned even amid a pullback in consumer spending. The ability of the chain to still grow sales in the period between 2008 and 2009 despite a deep recession was cited as evidence of the restaurant operator’s resilience.
Read more on the earnings expectations for Wednesday .
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Baird voices bullishness on Yum! Brands ahead of earnings (update)