YUM changes

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View the full Nov 4, 2026 version

Price: $155.40 → $160.21(+3.1%)
Next earnings: Nov 3, 2026 → Feb 3, 2027
Next earnings is estimate: No → Yes
About: Yum! Brands owns KFC, Taco Bell, and Habit Burger & Grill. After it sold Pizza Hut in 2026, it has more than 44,000 restaurants in 151 countries. Franchisees run almost all of them. Yum makes most of its money from franchise fees and royalties, which are a percentage of each restaurant's sales. So franchisees pay most of the cost to build and run the stores. KFC is the biggest brand, with removed: about 34,700 restaurants, added: 35,421 restaurants on September 30, 2026, and about 90% of them are outside the US. KFC also makes the most profit: $1.5 billion of division operating profit in 2025, against $1.1 billion for Taco Bell. Most Taco Bell restaurants are in the US. Yum also builds its own restaurant software, called Byte by Yum!, for ordering, kitchens, and delivery. Digital orders were removed: more than 60% added: 64% of system sales in removed: Q2 added: Q3 2026, not counting Pizza Hut.
Thesis: Yum Brands trades at a discount because a large Cyclospora outbreak at Taco Bell in July 2026 raised doubt about how fast the brand recovers. State health officials called it the largest US Cyclospora outbreak on record, with 12,883 cases. Taco Bell makes about 43% of Yum's division profit without Pizza Hut. removed: Yum said added: In Q3 2026, Taco Bell US same-store sales fell removed: 2% in Q3 through July 27, a period that includes the first weeks of the outbreak, added: 4%, and removed: it expects a lower Taco Bell removed: US restaurant margin in Q3. added: division operating profit fell 5%. Higher interest rates add a second pressure. The 10-year Treasury yield rose from about 4% in February 2026 to above 5% from mid-September 2026, and this lowers the price investors pay for steady franchise royalties. Yum also carries about removed: $12.3 added: $11.6 billion of below-investment-grade debt. KFC is the larger profit engine and was not affected by the outbreak, but its same-store sales grew only removed: 2% added: 1% in removed: Q2 2026. added: Q3 2026, while its units grew 7%. For the gap to close, Taco Bell US same-store sales must turn positive again by Q1 2027. KFC unit growth must stay at 5% or more. Yum must removed: use the about $2.3 billion from the Pizza Hut sale to repay its $675 million revolver and buy back shares, and refinance about $1.6 billion of debt that matures in 2027 at a reasonable removed: cost. The first test is Yum's added: cost, while it uses the Pizza Hut proceeds for buybacks. In the Q3 removed: 2026 added: report on November 3, 2026, Yum said that Taco Bell US has done better than the fast-food industry in same-store sales since the end of September, but it did not say that these sales were positive. The next tests are the refinancing before March 2, 2027, and the Q4 report, expected in early removed: November 2026, and above all what management says about October sales. added: February 2027. If Taco Bell recovers on that path, the discount can close over the next two to four quarters. The main risk is that customer trust returns more slowly than the outbreak ended, while low-income customers cut back and competitors fight on price.
Risks: Taco Bell makes about 43% of Yum's division profit without Pizza Hut. The July 2026 Cyclospora outbreak pushed its US same-store sales removed: down, added: down 4% in Q3 2026, and removed: Yum expects a lower added: the margin removed: at added: of its own US removed: Taco Bell restaurants added: fell to 20.5% from 26.2% in removed: Q3. added: Q2. If customers stay away longer than expected, Yum's profit growth slows. Several proposed class-action lawsuits also add legal costs. Higher interest rates lower the price investors pay for steady franchise royalties. The 10-year Treasury yield rose from about 4% in February 2026 to above 5% in September 2026. The direct cost is small, because about 96% of Yum's debt, not counting the revolver, had a fixed rate at June 30, 2026, after swaps. Yum had about removed: $12.3 added: $11.6 billion of debt at removed: June added: September 30, 2026, with a below-investment-grade credit rating (BB+ at S&P, Ba2 at Moody's). It targets net debt of about 4 times EBITDA. About $1.6 billion matures in 2027: $884 million of securitization notes at 1.95% in February and $750 million of notes at 4.75% in June. Refinancing will cost more. If Yum does not refinance most of its June 2027 notes by March 2, 2027, its Term Loan A and its revolver also come due early. Lower-income customers are cutting back on fast food, and competitors such as McDonald's and Burger King push low-price deals. Weight-loss drugs such as GLP-1s can also reduce how much people eat out. These trends can slow traffic and lower prices at Taco Bell. KFC same-store sales grew only removed: 2% added: 1% in removed: Q2 added: Q3 2026, and KFC US system sales fell removed: 2%. added: 6% without currency effects. In 2026, Yum stopped reporting KFC US and international same-store sales separately. KFC's growth depends more and more on new stores outside the US, and China is about 26% of KFC system sales. Yum has a new CEO and a new CFO since October 2025, and its COO removed: leaves added: was due to step down on November 1, 2026. It still provides its Byte by Yum! software and other services to Pizza Hut after the sale, and a $75 million part of the price depends on Pizza Hut profit targets through 2029.
Balance sheet: Cash: removed: $674M added: $2.1B Debt: removed: $12.3B added: $11.6B Net debt: removed: $11.6B added: $9.5B EBITDA, last 12 months: $2.9B Net debt / EBITDA: removed: 4.0× added: 3.2× (medium) Interest cover: removed: 5.0× added: 5.1× Ratings: S&P BB+, Moody's Ba2 Yum had a shareholders' deficit of removed: $7.1 added: $6.17 billion at removed: June added: September 30, 2026, because for years it has used debt to fund large buybacks and dividends. The debt supports buybacks, but it leaves little room if Taco Bell profit falls, and ratings are below investment grade. Yum targets net debt of about 4.0 times EBITDA and adds debt as profit grows. added: At September 30, 2026, debt was $11.60 billion: $2.14 billion of short-term borrowings and $9.46 billion of long-term debt. Cash was $2.11 billion. In the first nine months of 2026, investing activities brought in a net $2.16 billion, mostly from the Pizza Hut sales. In the same period, Yum repaid a net $300 million of revolving credit, bought back $1.20 billion of shares and paid $616 million of dividends. EBITDA is for the 12 months to June 2026 and includes Pizza removed: Hut, and interest added: Hut. Interest cover is removed: first-half 2026 operating profit added: for the first nine months of 2026, without the $1.68 billion gain on the Pizza Hut sales, over net interest. At June 30, 2026, the debt was in four layers. The first removed: layer is added: was $4.3 billion of securitization notes, secured by US Taco Bell franchise royalties. A special-purpose subsidiary, Taco Bell Funding, issued them. The second removed: is added: was a secured bank credit removed: agreement. Under it, Yum has added: agreement, with a $488 million Term Loan A, a $1.42 billion Term Loan B and $675 million drawn on a $1.5 billion revolver. The third removed: is added: was $750 million of subsidiary unsecured notes due June 1, 2027. The fourth removed: is added: was $4.55 billion of unsecured notes at the parent. After swaps, about 96% of the debt other than the revolver and leases had a fixed rate, at an average of about 4.5%. About $1.6 billion matures in 2027. $884 million of securitization notes are due in February 2027. If Yum does not repay them on time, all the securitization notes start to pay down principal early. The $750 million of subsidiary notes cause a springing maturity. If more than $250 million of them are still outstanding on March 2, 2027, the Term Loan A and the revolver come due. removed: Thus the balance sheet showed these two loans as short-term debt, with the notes that mature in 2027. The same two loans also come due on December 15, 2027, if more than $250 million of the Term Loan B is still outstanding then. removed: Yum completed the sale added: The Q3 release of removed: Pizza Hut on September 1, added: November 3, 2026, removed: for about $2.3 billion added: gave no new details of removed: expected net proceeds. added: these layers; Yum removed: said that it will use the proceeds to repay the revolver and use most of the remainder for buybacks, under a $4 billion program to June 2028. By October 12, 2026, Yum had not reported a debt repayment or a refinancing after June 30. added: gives them in its 10-Q. As of removed: Jun added: Sep 30, 2026.
Checkpoints: Sep 1, 2026: Pizza Hut sale to LongRange Capital completes. Passed. Watch: Closing of both Pizza Hut sales with about $2.3 billion of net proceeds passes; a failed or delayed closing fails. Outcome: Yum completed the sale on September 1, 2026, after the Yum China part closed on August 7, for $2.7 billion in total plus an earn-out of up to $75 million. Nov 3, 2026: Q3 2026 results: Taco Bell recovery after the outbreak. removed: Pending. added: Failed. Watch: Taco Bell US same-store sales that improve each month to positive in October, and a Taco Bell US margin within 19% to 21%, pass; a deeper decline or a lower margin fails. added: Outcome: Taco Bell US same-store sales fell 4% in Q3, more than the 2% decline through July 27, and Yum did not say that October sales were positive, although the US restaurant margin of 20.5% was within the range. Feb added: 3, 2027 (estimate): added: Q4 2026 results: Taco Bell US sales trend. Pending. Watch: Taco Bell US same-store sales near zero or positive in Q4 and KFC unit growth of 5% or more pass; another Taco Bell US decline of 2% or more fails. Feb 2027 (estimate): Repay $884 million of securitization notes due February 2027. Pending. Watch: Repaying or refinancing the notes on time at a reasonable rate passes; a missed date, which makes all the securitization notes start to pay down principal early, fails. Mar 2, 2027: Refinance June 2027 subsidiary notes before springing maturity. Pending. Watch: Repaying or refinancing at least $500 million of the $750 million notes by this date at a reasonable rate passes; a missed date, which makes the Term Loan A and the revolver come due, fails. Apr 2027 (estimate): Q1 2027 results: Taco Bell US same-store sales positive. Pending. Watch: Positive Taco Bell US same-store sales and KFC unit growth of 5% or more pass; negative Taco Bell sales fail.
Recent events: added: Nov 3, 2026: Yum reported Q3 2026 results. GAAP EPS was $5.92, with a pre-tax gain of about $1.7 billion on the Pizza Hut sales, and EPS without special items fell 1% to $1.56. Without Pizza Hut, units grew 7% and core operating profit grew 1%. KFC same-store sales grew 1%, and KFC division operating profit grew 9%. Taco Bell US same-store sales fell 4%, Taco Bell division operating profit fell 5%, and the margin of Taco Bell's own US restaurants was 20.5%. Yum said that Taco Bell US has done better than the fast-food industry in same-store sales since the end of September. It returned $1.8 billion to shareholders in the first nine months of 2026. Sep 17, 2026: Third-party foot-traffic data (Placer.ai) showed Taco Bell US visits per restaurant down 12.2% from a year earlier, on average, from July 6 to September 11, 2026. This average includes the worst days of the outbreak. On July 17, visits were about 31% below the average for the same weekday from January 1 to July 6. The data does not show the level in mid-September. Sep 11, 2026: The CDC declared the Cyclospora outbreak over. It counted 12,883 illnesses in 21 states, 570 hospitalizations, and 2 deaths. The source was processed iceberg lettuce from Taylor Farms de Mexico. State health officials and news reports called it the largest US Cyclospora outbreak on record. Sep 9, 2026: At the Barclays Global Consumer Staples Conference, Yum's CFO, Ranjith Roy, said Taco Bell's recovery "remains on plan," with several days of positive sales in the US. He also said that it was too early to declare a full recovery. Sep 1, 2026: Yum completed the sale of Pizza Hut outside Mainland China to LongRange Capital, for $1.488 billion in cash, subject to adjustments. Yum can also get a $75 million earn-out payment by 2030 if Pizza Hut meets profit targets. Pizza Hut's CEO, Aaron Powell, left Yum on the same day. Yum now has more than 44,000 restaurants in 151 countries. Aug 11, 2026: News reports said that Taco Bell and Taylor Farms were named in several proposed class-action lawsuits over the Cyclospora outbreak. The first lawsuits were filed in mid-July. Aug 7, 2026: Yum China completed its purchase of the Pizza Hut brand in Mainland China from Yum! Brands, for $1.2 billion. Jul 30, 2026: Yum reported Q2 2026 results. Revenue was $2.17 billion, up 12% from last year. Adjusted EPS was $1.62. Excluding Pizza Hut, system sales grew 7% and core operating profit grew 8%. Taco Bell US same-store sales grew 7%, and KFC same-store sales grew 2%. Jul 30, 2026: Management said Taco Bell US same-store sales were down 2% in Q3 through July 27, after the Cyclospora outbreak, but that the decline was getting smaller. It expects the margin at Taco Bell's own US restaurants to be 19% to 21% in Q3, against 26.2% in Q2. Jul 17, 2026: Taylor Farms recalled lettuce linked to a multistate Cyclospora outbreak at Taco Bell restaurants. The CDC first reported the outbreak on July 14. Taco Bell traffic dropped, and YUM shares fell about 8.5% from July 13 to July 17. Jun 16, 2026: Yum agreed to sell Pizza Hut for $2.7 billion in total: Pizza Hut in Mainland China to Yum China for $1.2 billion, and the rest of Pizza Hut to LongRange Capital, plus a $75 million earn-out if Pizza Hut meets profit targets in 2027, 2028, or 2029. The board also approved a new $4 billion share buyback that runs until June 30, 2028. Jun 2, 2026: Yum said its Chief Operating Officer, Tracy Skeans, will step down on November 1, 2026. Apr 29, 2026: Yum reported Q1 2026 results. Revenue was $2.06 billion and adjusted EPS was $1.50, up 15% from last year. Taco Bell same-store sales grew 8%. Nov 4, 2025: Yum started a review of strategic options for Pizza Hut, after Pizza Hut same-store sales fell for most of 2025. Oct 1, 2025: Chris Turner, formerly Yum's CFO and Chief Franchise Officer, became CEO. He replaced David Gibbs, who moved to an advisory role before he retires in 2026. Ranjith Roy became CFO on the same day.