What happened

Shares of Yum! Brands (NYSE:YUM) climbed 26.1% in April, according to data from S&P Global Market Intelligence. The stock fell roughly 23.2% in March as the coronavirus prompted across-the-board sell-offs, but the restaurant company's share price posted a substantial recovery in April thanks in large part to momentum for the broader market. 

^SPX Chart

^SPX data by YCharts.

Yum! Brands gained ground in conjunction with momentum for the broader market last month, and relatively solid first-quarter results published at the end of the month helped the company hold on to its gains. It published quarterly results on April 29, reporting adjusted earnings per share of $0.64 on sales of $1.26 billion. The average analyst target, as polled by Refinitiv, had Yum! posting adjusted earnings of $0.65 on revenue of $1.2 billion.

The outside of a Taco Bell restaurant.

Image source: Taco Bell.

So what

Restaurant stocks saw substantial rebounds in April's trading. The Cheesecake Factory (NASDAQ:CAKE) and Cracker Barrel Old Country Store (NASDAQ:CBRL) each recorded double-digit gains in share price in the month despite facing greater operating challenges compared to Yum! and other companies with greater focuses on food pickup and delivery. 

CBRL Chart

CBRL data by YCharts.

Cracker Barrel stock had fallen roughly 41.9% in March's trading, while Cheesecake Factory saw its share price decline roughly 52.1% in the month. April brought positive momentum for restaurant stocks as concerns about the long-term impact of the coronavirus lessened and the Trump administration rolled out guidelines for preliminary business reopenings. However, performance for individual restaurant stocks in 2020 has been closely linked to the extent that the underlying businesses depend on sit-down customers.

While Cracker Barrel and Cheesecake Factory are both geared more toward sit-down eating, Yum!'s portfolio of fast-food restaurants (including Taco Bell, KFC, and Pizza Hut) is better suited to serving takeout food and continuing to operate amid coronavirus-related restrictions. The divergence in performance between sit-down-focused restaurants and those with sizable takeout and delivery components has been apparent in the wake of the coronavirus crisis. 

The Cheesecake Factory published preliminary first-quarter results showing steep sales declines despite initiatives like curbside pickup in response to the coronavirus. Same-store sales were estimated to have fallen roughly 13% year over year in the period, with comps declining 3% in February and 46% in March.

Yum! Brands stock is down roughly 16.5% year to date, while the S&P 500 index has dipped roughly 12%. Cracker Barrel stock is down 39.5% in 2020 trading, and Cheesecake Factory's stock has slid 47%. Meanwhile, McDonald's stock is down roughly 7% year to date, and Domino's Pizza (which derives essentially all of its business from takeaway and delivery) is handily outperforming the market with roughly 23% gains for the stock this year. 

Yum! has been ramping up delivery offerings and investing in new service and tech solutions, but the loss of sit-down business still had a significant impact on performance in the first quarter. Comps across the first three months of the year came in roughly 7% lower compared with the same stretch in 2019. Growth provided by new stores helped offset some of the decline, and total sales declined 3% year over year in the quarter. 

Now what

Yum! Brands' share price has slipped early in May's trading. The stock has fallen roughly 4% in the month so far, while the S&P 500 index has dipped roughly 3%. Management has stated that the business is seeing comps improve in April compared with March. But CFO Chris Turner noted that the company still had roughly 10,000 stores closed at the end of April. Yum! also withdrew the full-year guidance it issued in February due to uncertainty created by the pandemic. 

Yum! stock trades at roughly 30 times the average analyst target for this year's earnings.  

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