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Yum! Brands and RBI Get Analyst Upgrades; Stocks Rise in Friday Trading

By Rhian Hunt – May 15, 2020 at 10:32AM

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The firm’s new price targets point to a possible 14% to 22% upside.

Stocks of two fast-food restaurant chains are up so far in Friday morning trading after a Stifel analyst upgraded their ratings from neutral to buy. Yum! Brands (YUM -1.35%), parent of Pizza Hut, Taco Bell, KFC, and other popular brands, and Restaurant Brands International (QSR -0.76%), or RBI, parent of Popeyes, Burger King, and Tim Hortons, were both recognized by analyst Chris O'Cull based on several factors.

The Stifel Financial Corp. analyst said in a research note the companies' business models already prepared them for the COVID-19 pandemic. The note pointed out, "Fast food restaurants were built for off-premise usage, with 70%+ of sales coming from drive-thrus." This matches up with Yum!'s takeout advantage, possibly giving it more resilience in April than restaurants heavily dependent on dine-in such as The Cheesecake Factory (CAKE 0.46%) and Cracker Barrel (CBRL -0.44%)

A rising stock chart.

Image source: Getty Images.

The Stifel researcher went on to remark, "Lastly, we believe YUM (98% franchised) and QSR's (99%) franchise systems will emerge largely intact with pockets of weakness in their bases." Again, this perspective echoes the experience of another restaurant chain, Dunkin' Brands (DNKN), where a 100% franchised business model gave the company the twin advantages of low capital expenditures during the pandemic and the flexibility for individual franchisees to adapt quickly to local health conditions and consumer demand. 

Along with the upgrade, Stifel set new price targets for the two restaurant chains. The analysis forecasts Yum!'s stock could reach $95 per share, while RBI's could climb to $62 per share. Both price targets represent double-digit percentage gains. Stifel noted, "These changes reflect our increased appetite for investing in fast food companies with durable business models."

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool recommends Dunkin' Brands Group. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$109.16 (-1.35%) $-1.49
Restaurant Brands International Inc. Stock Quote
Restaurant Brands International Inc.
QSR
$54.97 (-0.76%) $0.42
Dunkin' Brands Group, Inc. Stock Quote
Dunkin' Brands Group, Inc.
DNKN
Cracker Barrel Old Country Store, Inc. Stock Quote
Cracker Barrel Old Country Store, Inc.
CBRL
$97.79 (-0.44%) $0.43
The Cheesecake Factory Incorporated Stock Quote
The Cheesecake Factory Incorporated
CAKE
$28.56 (0.46%) $0.13

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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