UBS’ Best Stocks In The AI, Growth & Low Rates Era: Top 29 US Stocks

7. Yum! Brands, Inc. (NYSE:YUM)

Number of Hedge Fund Investors In Q2 2024: 36

UBS’ Sector Rating: Attractive

Sector: Consumer Discretionary 165

Yum! Brands, Inc. (NYSE:YUM) is one of the biggest restaurant chains in the world. It has a global presence and operates through well-known brands such as KFC, Pizza Hut, and Taco Bell. The firm’s brand image provides it with a key advantage of customer loyalty and recognition which enables it to deliver volume and command global recognition. This has enabled Yum! Brands, Inc. (NYSE:YUM) to amass sizeable financial resources as evidenced by its $6.4 billion in total assets and $7 billion in trailing twelve-month revenue. Since it’s a restaurant chain, Yum! Brands, Inc. (NYSE:YUM) thrives in a robust economy, and when it is able to balance out prices with volume for the perfect target. Additionally, two other key factors that drive the firm’s hypothesis are its ability to keep margins steady through cost control and a globally driven franchise revenue. In today’s environment of slowing global growth (as we alluded to in our introduction) and a strong US dollar, the pressure on Yum! Brands, Inc.’s (NYSE:YUM) flagship US Taco Bell restaurant chain has grown.

Yum! Brands, Inc.’s (NYSE:YUM) management commented on Taco Bell’s performance during the Q2 2024 earnings call:

“Moving on to the Taco Bell division, which represents 37% of our divisional operating profit. US same-store sales grew 5%, outpacing the US QSR industry by a wide margin. Taco Bell executed its winning formula this quarter through introducing a variety of compelling innovations such as the Cheez-It and Secret Aardvark fries. The second quarter also reflected sales contribution from the Cantina Chicken menu, our foray into an elevated chicken offering and a new platform to innovate around.

Since the platform launch, Taco Bell’s chicken sales mix has increased 10 points with nearly one in four orders, including a Chicken Cantina item. Another part of the team’s winning formula is digital in, which digital sales continue to grow at a breakneck pace. In Q2, Taco Bell’s loyalty sales were up over 30%. At Taco Bell International, the team is working on building brand relevance. It is still early days in many markets and trends remain volatile, but we remain confident in the long-term opportunity. A restored emphasis on value has forced our teams to be creative with a more limited national marketing budget. In more mature markets within Europe, which accounts for over 40% of Taco Bell International system sales, we saw encouraging signs of improvement with the introduction of value offers.”