It's shaping up to be a tough period for Yum! Brands, Inc. (NYSE:YUM), which a week ago released some disappointing quarterly results that could have a notable impact on how the market views the stock. Yum! Brands missed earnings this time around, with US$1.6b revenue coming in 6.6% below what the analysts had modelled. Statutory earnings per share (EPS) of US$1.10 also fell short of expectations by 12%. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

After the latest results, the 24 analysts covering Yum! Brands are now predicting revenues of US$7.71b in 2024. If met, this would reflect a meaningful 9.6% improvement in revenue compared to the last 12 months. Statutory per share are forecast to be US$5.65, approximately in line with the last 12 months. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$7.78b and earnings per share (EPS) of US$5.81 in 2024. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

The consensus price target held steady at US$145, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Yum! Brands at US$161 per share, while the most bearish prices it at US$127. This is a very narrow spread of estimates, implying either that Yum! Brands is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that Yum! Brands' rate of growth is expected to accelerate meaningfully, with the forecast 13% annualised revenue growth to the end of 2024 noticeably faster than its historical growth of 6.2% p.a. over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 9.7% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Yum! Brands is expected to grow much faster than its industry.

The Bottom Line

The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for Yum! Brands. Fortunately, they also reconfirmed their revenue numbers, suggesting that it's tracking in line with expectations. Additionally, our data suggests that revenue is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for Yum! Brands going out to 2026, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 3 warning signs for Yum! Brands you should be aware of, and 2 of them are significant.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.