Yum's Quarter Offers Investors Confidence
We're increasing our $78 fair value estimate for the narrow-moat firm.
We believe investors should walk away from
Based on increased visibility over Yum's near-term sales layers, unit development plans, and cost optimization, we still see management's 2019 EPS target of $3.75 as achievable and plan to add a few dollars to our $78 fair value estimate. While macro conditions are still a wild card, we anticipate that a more heavily franchised structure, new sales layers, and increased scale in emerging markets will keep system sales at 6%-7% and drive core operating margins to the mid-50s by 2020 (compared with 26.7% in 2016).
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