July 14, 2016 | 9:45 AM by Fahad Khalid | fkhalid@jaguaranalytics.com

Yum Brands (YUM) Breaks Out – See Our Notes to Clients Since May 9

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July 13, 2016

Yum Brands (YUM) – Boom! Raising full year guidance. Stock guided higher by 5%. Highlights:

– Q2 EPS $0.75 vs. $0.74 estimate, penny beat
– Q2 Revenues $3.01B vs. $3.09B estimate, miss
– Q2 SSS China Division +3% YoY, that’s impressive
– Q2 SSS Division +6% YoY, very very impressive
– Q2 SSS Pizza Hut Division +1% YoY, okay
– Q2 SSS Taco Bell Division +2% YoY, okay
– Q2 Worldwide Division +3% YoY, nice!

July 7, 2016

Yum Brands (YUM) – I haven’t had Taco Bell since that one night after a frat party at Michigan State some 16 years ago. But I like the stock! Here is something interesting from Nomura yesterday:

“Thrillist notes that the Naked Chicken Chalupa, which uses a piece of fried chicken in places of a taco shell, “is being given a test run at about 30 Taco Bells in the Kansas City area” at present. Odds appear to favor the Naked Chicken Chalupa at a Taco Bell near you at some point in 2017. And, with YUM! China probably having been spun off as a separately traded master franchisee by that time, Taco Bell-and its results-likely will be relatively more important to YUM’s stock during 2017 than they have been in many recent years.”

May 9, 2016

Yum! Brands (YUM) – Buyers of 7,000 Jan’17 100-strike calls paid $1.35 offer on Friday, May 6. Approx $950,000 bullish bet now reflected in higher open interest this morning. Highlights from prior quarter issued on April 20:

  • Q1 EPS $0.95 vs. $0.83 estimate, beat
  • Q1 Revenues $2.62B vs. $2.66B estimate, miss
  • Q1 Worldwide system sales +5% YoY
  • Q1 Worldwide system same store sales +2% YoY
  • Q1 Worldwide operating profit +21% YoY
  • Q1 Yum China Margins +200 bps improvement

Key takeaway from conference call that gets my attention and potentially highlights that forward estimates are low:

  • Yum China rebounded sharply with large check growth of +9% YoY while the consensus hasn’t adjusted figures with most staying below +3% for the rest of year
  • Exporting international trends into the US where SSS is lagging to improve growth trajectory, such as new faster ovens and improved menu offering
  • In China Effective May 1, a new 6% VAT replaces the 5% business tax but allows significant new credit, overall lowering the tax burden

Wild Card – China Sovereign Fund to Seek Control of $8 Billion Yum Unit – Bloomberg


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