Domestic business continues to improve also
The company began a major rebound in the U.S in 2012, driven by a turnaround of its Taco Bell business after a false lawsuit over its ground beef in 2011 led to almost a year of negative comps. The company introduced the highly successful Doritos Locos Tacos through a partnership with Frito-Lay. Earlier this year, Taco Bell launched the widely anticipated (and tasty) Cool Ranch flavor of Doritos Locos Tacos, yielding another major success. Management has noted that they are committed to rolling out new flavors of Doritos Locos Tacos and utilize the Frito-Lay partnership to create new menu items that combine flavors and products from the two companies.
I believe that new product innovation can continue to drive solid same-store sales performance. The company’s heavily franchised U.S strategy can allow it to take on additional leverage to create further shareholder value.
Market is big enough for everyone
Investors that aren’t fully convinced of a Yum! Brands Chinese recovery should consider one of the company’s largest competitors, Domino’s Pizza, Inc. (NYSE:DPZ) as it has been benefiting from the same international and domestic growth story.
Domestically, the company has seen strong traffic growth driven by the continued success of the Handmade Pan Pizza and an ongoing expansion of digital and mobile apps that are available for 95% of all smart-phones sold in the U.S.
Domino’s Pizza, Inc. (NYSE:DPZ) doesn’t have as large of a presence in China, but management noted in the most recent conference call that given the size of the opportunity, it is an area of focus though it is currently not a big driver of revenue.
The pizza chain did show an impressive growth in the international market, however, delivering same-store sales growth of 5.8% while opening 116 new stores during the most recent quarter.
Conclusion
I believe that it is not too late for investors to purchase one of the world’s best global growth companies at an attractive valuation. Yum! Brands, Inc. (NYSE:YUM) has suffered recently from perceived safety issues in China. Analysts seem to be mixed on the future performance of the stock, with Street best price target of $105 coming from Stifel with a buy rating while Credit Suisse has a $77 target and an outperform rating.
The article Yum! Brands: A Global Growth Story originally appeared on Fool.com and is written by Jayson Derrick.
Jayson Derrick has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
