Yum! Brands is bolstering its menu but remains exposed to China
Investing in Yum! Brands, Inc. (NYSE:YUM) is a bit tricky. The company owns a number of classic fast food chains, including Taco Bell, KFC and Pizza Hut. But when you buy Yum! Brands, Inc. (NYSE:YUM) shares, you’re really buying two companies in one.
The first company is its Western operations. That business has been going pretty well for quite some time. Taco Bell, in particular, has seen a dramatic resurgence following the release of the Doritos Locos taco. The company has also added a Cantina Bell menu featuring more upscale items designed to attract the Chipotle crowd.
The second company is Yum! Brands, Inc. (NYSE:YUM) China, and in particular, KFC in China. While KFC is a middle of the pack chain in North America, it remains the single largest fast food chain in the Middle Kingdom.
That’s been a source both of growth, and of headaches. Over the last five years, shares of Yum! Brands, Inc. (NYSE:YUM) are up better than 70%, with much of that coming from foreign growth. But more recently, China has been a drag on the stock, as scares related to Chicken quality and Avian flu have drove away customers.
Last week, Yum! Brands, Inc. (NYSE:YUM) shares bounced after the company posted better than expected earnings, but sales in China dropped by 20%. Going forward, China will continue to be a huge market for the company.
McDonald’s has traded to new highs as it adds menu items
Trading above $100, McDonald’s Corporation (NYSE:MCD) shares remain near an all-time high. The iconic fast food giant has seen its shares soar since the financial crisis, almost doubling since March 2009.
Some of those investors are likely interested in McDonald’s Corporation (NYSE:MCD) more as an alternative to fixed income than as a solid equity investment. The company currently yields near 3% and maintains an excellent credit rating. With central banks keeping interest rates near zero, McDonald’s Corporation (NYSE:MCD) stock is a better alternative to bank deposits.
Still, the company has been working to keep its core business humming along. After successfully adding new premium coffee drinks in recent years, McDonald’s Corporation (NYSE:MCD) has added three new menu items the company hopes will form the basis of its continued growth.
Chief among them is the McWrap, a customizable chicken wrap sandwich designed to appeal to young adults.
Burger King, fresh out of private equity control, has had a dramatic makeover
After being acquired by the private-equity firm 3G Partners, Burger King Worldwide Inc (NYSE:BKW) returned to the public markets last year. Since that time, shares are up a bit more than 25%.
Pershing Square was also involved in the deal, and the fund continues to own a significant stake. In a presentation from last April (titled Justice is Best Served Flame Broiled), Bill Ackman laid out the bull case for Burger King Worldwide Inc (NYSE:BKW).
Burger King’s stores have been partially remodeled, as the company has added digital menu boards and other aesthetically pleasing features. In terms of food, the chain’s menu has received almost a complete makeover.
In the past, true to its name, Burger King Worldwide Inc (NYSE:BKW) was focused around selling burgers. This tactic appealed mostly to males between the ages of 18 and 34. To broaden its consumer base, Burger King Worldwide Inc (NYSE:BKW) has added new items aimed at females and different age groups.
