Yum! Brands (YUM, Financial) disappointed investors in 2016, as the stock was down over 15%. The stock dropped nearly 30% in November 2015 which was the result of the company’s successful split-up of its China business. Even so, the stock has showed an upward momentum this year, as it is up nearly 8% year to date.
The company reported fourth quarter results on Thursday. It had EPS of 79 cents, exceeding the estimates by 5 cents. On the other hand, it failed to beat the revenue estimates, as its revenue came in at $2 billion, missing the estimates by $70 million. However, that figure still represents an increase of 2% year over year compared to a 1.2% revenue decline in Q4 2015.
Yum! detailed that it is presently focusing to speed up its growth, decrease volatility and escalate capital returns to investors. The company is on its way to escalate its franchise mix to nearly 98% in the coming two years.
It looks like Yum! has made a good long term strategy; as it will help the company to shrink its yearly run rate Capex to approximately $100 million. Additionally, it will enhance its efficiency by dropping down general and administrative expenses as a percent of system sales to 1.7%.
Taco Bell, a subsidiary of Yum! Brands, had introduced inventive recipes such as the Beefy Crunch Burrito together with Flamin’ Hot Fritos and the Doritos Locos tacos. And now, it recently launched its highly anticipated Naked Chicken Chalupa priced at just $2.99.
In the past, when KFC, another subsidiary of Yum!, experienced slowing sales growth, it innovatively replaced the bun with a fried chicken patty. Now the company has applied the same concept in Taco Bell.
Taco Bell believes that the Naked Chicken Chalupa will escalate its sales at a considerable rate. When it comes to the international market, Taco Bell will continue to perform well, as it opened 53 new restaurants for another record year of development.
Conclusion
Yum! Brands is off to a decent start this year and it’s likely that it will continue to move upward. The company recently declared quarterly dividend of 30 cents per share that results in a vigorous dividend yield of 1.76%. Additionally, the company has plans to return $13.5 billion to investors by 2019.
As a result, Yum! Brands looks like a great pick for long-term investors.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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