With shares of Yum! Brands (NYSE:YUM) trading around $68, is YUM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Yum! Brands is a quick service restaurant company based on number of system units, with approximately 37,000 units in more than 120 countries and territories. The company — through its three main restaurants of KFC, Pizza Hut, and Taco Bell — develops, operates, franchises, and licenses a worldwide system of restaurants. These popular food chains prepare, package, and sell a menu of priced food items. Convenience and tasteful foods continue to rise in popularity worldwide, which allows Yum! Brands to be able to provide the food items demanded by consumers worldwide. Through its segments, Yum! Brands will continue to supply its world audience with quick and tasty items for many years.
T = Technicals on the Stock Chart are Mixed
Yum! Brands stock has been consolidating after a few years of explosive moves higher. The stock is still in the middle of its consolidation range, but a solid break higher will surely see a powerful move. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Yum! Brands is trading around its rising key averages which signal neutral price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Yum! Brands options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Yum! Brands Options | 27.7% | 93% | 90% |
What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| July Options | Flat | Average |
| August Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Mixed Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Yum! Brands’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Yum! Brands look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | -25% | -3.09% | 25% | 6.15% |
| Revenue Growth (Y-O-Y) | -7.58% | 1.02% | Top Small Cap Companies For 20149.01% | 12.50% |
| Earnings Reaction | 7.01% | -2.9% | 7.49% | 0.47% |
Yum! Brands has seen mixed earnings and revenue figures over the last four quarters. From these figures, the markets have generally been pleased with Yum! Brands’s recent earnings announcements.
P = Poor Relative Performance Versus Peers and Sector
How has Yum! Brands stock done relative to its peers, McDonald’s (NYSE:MCD), Jack In The Box (NASDAQ:JACK), Wendy’s (NASDAQ:WEN), and sector?
| Yum! Brands | McDonald’s | Jack In The Box | Wendy’s | Sector | |
| Year-to-Date Return | 3.57% | 10.93% | 28.57% | 24.36% | 11.56% |
Yum! Brands has been a poor relative performer, year-to-date.
Conclusion
Yum! Brands is a quick service restaurant company that is most notably known for its KFC, Pizza Hut, and Taco Bell food chains. The stock has been consolidating over the last year after experiencing several powerful moves higher over the last few years. Over the last four quarters, Yum! Brands has seen mixed earnings and revenue figures that have generally kept investors pleased. Relative to its peers and sector, Yum! Brands has been a poor year-to-date performer. WAIT AND SEE what Yum! Brands does in coming quarters.
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