Argus advised clients that choppy results among its key brands and an elevated valuation should arouse caution on Yum! Brands ( NYSE: YUM ).
“The company's asset-light business model (in which franchisees own and operate 98% of stores) provides a steady stream of franchise royalties and fees; however, its brands typically report uneven results, with strength at Taco Bell offset by weakness at Pizza Hut and KFC,” the firm’s analysts wrote on Wednesday. “Given the company's near-term earnings outlook and relatively high valuation, we prefer the shares of Chipotle Mexican Grill ( CMG ) and Restaurant Brands International ( QSR ) in the restaurant space.”
Yum! Brands ( YUM ) has notably underperformed those key peers in the past month, failing to benefit from a rebound in consumer discretionary stocks.
Shares of the Kentucky-based restaurant chain fell 1.63% in Wednesday’s premarket trading.
Read more on the international issues weighing on Yum’s results .
For further details see:
Yum Brands downgraded at Argus amid valuation concerns