To The Moon

$Yum(YUM)$ $McDonald's(MCD)$ $Domino's Pizza(DPZ)$ 

🎯 Executive Summary

I’m positioning Yum! Brands ($YUM) at the inflection point of a multi-year transformation, where decisive portfolio pruning meets accelerating digital and franchise leverage. The Q3 2025 earnings release on 4 November 2025 delivered a textbook beat-and-raise moment: revenue climbed to $1.98 billion, up 8 % year-over-year and $20 million above consensus; adjusted EPS hit $1.58, a 15 % jump that cleared the $1.47 estimate by 7.5 %. System-wide sales grew 5 % excluding currency effects, same-store sales rose 3 %, and net unit expansion added 1 131 locations, pushing the global footprint past 62 000 restaurants. Digital orders shattered records at $10 billion, now representing roughly 60 % of mix, a metric I track religiously because it directly correlates with higher average tickets and lower labour intensity.

The brand-level divergence sharpens my thesis. Taco Bell posted 9 % system sales growth and 7 % same-store sales, driven by value-tier innovation and late-night traffic; KFC delivered 6 % system growth with 3 % comps, anchored by emerging-market unit adds; Pizza Hut, however, contracted 1 % on both metrics, prompting an immediate strategic review that could culminate in divestiture, refranchising, or outright closure of underperforming clusters. Shares gapped from $136.80 to $148.08 in the post-earnings session, an 8.2 % move that I interpret as the market pricing in optionality rather than merely celebrating the beat. Current price as I write sits at $147.62, with after-hours volume tapering but institutional accumulation evident in dark-pool prints.

💰 Financial Performance Breakdown

I dissect the numbers line by line because aggregated headlines obscure brand-specific torque. Consolidated revenue of $1.98 billion reflects:

   •   KFC Division: $1.05 billion equivalent contribution (inferred from segment profit weighting), up 6 % ex-FX, with 14 % core operating profit growth to $342 million; unit count now 32 950, adding 842 net new doors year-to-date.

   •   Taco Bell Division: $732 million system sales proxy, up 9 %, with 8 % profit growth to $218 million; U.S. same-store sales +7 %, international +8 %.

   •   Pizza Hut Division: $258 million system sales, down 1 %, profit flat at $92 million; U.S. comps -6 %, international +2 %.

   •   Habit Burger & Grill (smaller segment): +4 % system sales.

GAAP operating profit rose 11 % to $678 million; adjusted operating profit +7 % after stripping one-time items. Free cash flow for the trailing twelve months stands at $1.62 billion, covering $750 million in dividends, $250 million in Q3 buybacks, and still leaving $600 million for opportunistic M&A or debt reduction. Net debt sits at $11.2 billion, but the franchise-heavy model keeps debt-to-EBITDA at a manageable 4.2 times.

🧠 Strategic Developments

CEO Chris Turner laid out a three-pillar roadmap on the earnings call that I’m stress-testing in real time:

1. Portfolio optimisation: the Pizza Hut review, led by a dedicated cross-functional team reporting directly to the board, will conclude by Q1 2026; scenarios range from full sale (precedents include Yum China spin-off) to accelerated refranchising of company-owned U.S. stores (currently ~8 % of Pizza Hut base).

2. Asset-light acceleration: acquisition of 28 high-volume Taco Bell units in Florida and Georgia for $52 million, instantly accretive at 8.5 % cash-on-cash yield; these stores average $2.8 million AUV versus system $2.3 million.

3. Digital flywheel: the Byte platform, now live in 65 % of U.S. Taco Bell locations, lifted digital attach rates by 400 basis points quarter-over-quarter; AI-driven dynamic pricing pilots in KFC Australia show 2.3 % ticket uplift without traffic erosion.

Leadership shuffles reinforce execution focus: Ranjith Roy steps in as CFO from PepsiCo, bringing supply-chain rigor; Sean Tresvant, ex-Nike, takes Taco Bell CEO reins to amplify cultural marketing; Jim Dausch joins as Chief Digital & Technology Officer from Domino’s, where he scaled the loyalty programme to 30 million members.

⚠️ Strategic Headwinds & Execution Risk

I never ignore the friction points; they define my risk-adjusted entries. Pizza Hut’s U.S. structural decay, with delivery mix now 48 % versus Taco Bell’s 38 %, exposes it to third-party fee compression (DoorDash, Uber Eats taking 25-30 % cuts). Labour inflation runs 4.8 % year-over-year in the U.S. quick-service restaurant segment per BLS data, squeezing franchisee margins to 14.2 % from 15.6 % a year ago. Currency headwinds trimmed $42 million from international profits; a 10 % further depreciation in the Turkish lira or South African rand could shave $15 million from 2026 EPS. Finally, the strategic review itself carries execution risk: historical divestitures (e.g., Long John Silver’s) incurred $80-120 million in one-time costs.

🧩 Analyst & Institutional Sentiment

I aggregate the latest targets post-earnings:

   •   UBS: $165 (from $152), Buy; cites Pizza Hut optionality adding $4-6 per share.

   •   Barclays: $162, Overweight; models 6 % long-term system sales CAGR.

   •   Morningstar: $160 fair value, Wide Moat reaffirmed; stresses 60 % digital mix as defensive.

   •   Bank of America: $155, Neutral; cautious on macro slowdown.

   •   Consensus 12-month target: $159.40, implying 8 % upside from $147.62.

Hedge fund updates via 13F filings (Q3 data released mid-November):

   •   Pershing Square (Ackman) added 180 000 shares, now 2.1 million total.

   •   Third Point initiated 450 000 shares.

   •   Vanguard and BlackRock trimmed modestly for rebalancing but retain 14.2 % and 8.7 %.

Options flow on 4-5 November shows heavy call buying in January $155 and $160 strikes, open interest up 320 %; put/call ratio fell to 0.42, bullish signal. Short interest sits at 2.8 % of float, down from 3.4 % pre-earnings.

📉📈 Technical Setup

I’m glued to the charts because price action confirms fundamentals. On the daily timeframe, $YUM cleared a multi-month consolidation triangle with a measured move targeting $158; the 21 EMA crossed bullishly over the 55 EMA on 4 November, volume 2.1 times 50-day average. Keltner Channel expansion signals volatility breakout; upper band now $152.40. RSI at 64 avoids overbought territory, MACD histogram flipped positive with widening spread. Key levels I’m tracking:

   •   Support cluster: $144.50 (21 EMA), $141.20 (50 DMA), $137.50 (triangle apex).

   •   Resistance: $152 (78.6 % Fibonacci retracement of 2025 high-to-low), $157 (prior swing high), $167 (February peak).

Weekly stochastic %K crossed above %D at 52, favouring continuation. Longer-term, the 20-year logarithmic channel projects $195-$205 by 2028 if the 7 % EPS growth algorithm holds; I overlay this with 200-week moving average support at $118, still miles away.

🌍 Macro & Peer Context

I frame Yum inside broader currents. U.S. consumer confidence per Conference Board rose to 108 in October from 98 in August, lifting discretionary fast-food spend; Atlanta Fed wage tracker shows 4.6 % year-over-year growth, supporting premiumisation at Taco Bell. Emerging-market GDP forecasts (IMF October update) peg India at 6.8 %, Indonesia 5.1 %; KFC captures 68 % of Yum’s international profit pool from these high-growth corridors. Fed funds futures price 75 bps of cuts through 2026, easing franchisee capex costs.

Peer multiples: McDonald’s ($MCD) trades 23 times forward EPS with 2 % SSS growth; Chipotle ($CMG) 42 times on 12 % comps; Yum at 22 times forward EPS with 5 % system growth offers relative value. EV/EBITDA 16.2 times sits below the 18.5 times quick-service median yet above Domino’s 15.8 times, reflecting brand diversification premium.

📊 Valuation & Capital Health

Market cap $41.3 billion at $147.62. Forward P/E 21.8 times on 2026 consensus $6.77 EPS (7 % growth). PEG ratio 2.9 times versus sector 3.4 times. Dividend $2.68 annualised yields 1.82 %; payout ratio 47 %, 16 consecutive years of increases. Share count down 1.8 % year-over-year via $1.1 billion repurchase authorisation remaining. Return on invested capital 28 %, top quartile.

⚖️ Forward-Looking Watchlist & Trade Plan

I’m building exposure methodically:

   •   Core long: accumulated 60 % of target position between $140-$144 on the pre-earnings dip.

   •   Add zone: $142-$145 on any post-gap pullback to 21 EMA.

   •   Stop: $136.80 (triangle invalidation).

   •   Profit tiers: scale 30 % at $157, 40 % at $167, trail remainder with 55 EMA.

Catalysts on my radar:

1. Pizza Hut review update, February 2026 earnings.

2. Q4 digital mix crossing 62 %, potential 50 bps margin lift.

3. KFC India unit adds surpassing 100 in Q4 (currently pacing 92).

4. Macro: December CPI print below 2.4 % triggers risk-on rotation into consumer discretionary.

Risk monitors: rising 10-year Treasury yield above 4.6 % pressures high-multiple defensives; escalation in Red Sea shipping disruptions adds 2-3 % to trans-Pacific protein costs.

🏁 Conclusion

I see Yum! Brands engineering a rare pivot: shedding a legacy drag while amplifying two high-velocity growth engines inside a capital-light framework. Taco Bell’s cultural resonance and KFC’s emerging-market footprint generate compounding cash flows that the Pizza Hut review now unlocks for reinvestment or shareholder return. The 8 % post-earnings surge isn’t euphoria; it’s recognition of a management team willing to confront underperformance head-on. I’m holding core exposure through 2026, adding on dips, and sizing the position for asymmetric upside as digital penetration scales toward 70 % and unit growth sustains 4-5 % annually. This isn’t a quarterly story; it’s a multi-year re-rating in motion.

📌 Key Takeaways

   •   Q3 revenue $1.98 B (+8 %), adj EPS $1.58 (+15 %), both beats.

   •   Taco Bell +9 % system, +7 % SSS; KFC +6 % system, 32 950 units.

   •   Pizza Hut strategic review launched; U.S. SSS -6 %.

   •   Digital $10 B record, 60 % mix; Byte platform driving attach.

   •   Technical breakout targets $157/$167; support $137.50.

   •   Consensus PT $159; hedge funds accumulating.

   •   Buy dips $142-$145, stop $136.80, trail with momentum.

📢 Don’t miss out! Like, Repost and Follow me for exclusive setups, cutting-edge trends, and insights that move markets 🚀📈 I’m obsessed with hunting down the next big movers and sharing strategies that crush it. Let’s outsmart the market and stack those gains together! 🍀 Trade like a boss! Happy trading ahead, Cheers, BC 📈🚀🍀🍀🍀

@Tiger_comments @TigerStars @TigerPicks @Daily_Discussion @TigerWire @TigerObserver @Tiger_Earnings