Bad news for restaurant conglomerate Yum Brands (YUM). While it got a leg up after a recommendation from JPMorgan analysts, that gain fell off after new reports said there was a new number three chicken chain in the market. No longer is KFC the third greatest, that title is now held by the pictured brand, Raising Cane’s. And Yum Brands investors felt the pinch, selling shares and sending them fractionally lower in Monday afternoon’s trading.
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Raising Cane’s has been on a tear in the last several months, launching an expansion effort that went far beyond its original two-state footprint of Texas and Louisiana. In 2020, it had 500 locations to its credit. Now it stands at nearly double that, with over 900, and it plans to open another 100 locations this year with 200 or more set to follow.
And now, it is actually a larger chicken chain than even Yum Brands’ KFC, now the third largest in the country. In fact, back in the first quarter, reports noted, KFC same-store sales dropped 1%. This by itself would not mean so much, except it represented the fifth consecutive quarter sales had dropped. Perhaps the biggest thing going for Raising Cane’s, reports noted, is its shockingly pure focus on chicken fingers. Even the chicken sandwich is just chicken fingers on a bun.
An Unfortunate Gift
But Yum Brands was determined to not be knocked out altogether. In fact, it recently offered up its headquarters complex, which features a building in the style of the United States’ White House as well as 29 acres of ground, to the Jefferson County Public Schools in Louisville. The district could, therefore, sell off some old buildings and use the proceeds to build new ones, since it had the Yum Brands headquarters block to use as well.
Not everyone was so convinced this was a good thing, though, with some pointing out that African-American slave labor had been involved in the construction of the original White House. Thus, the building would come with an unexpected—and unwelcome—image problem for a school district pursuing racial equity, some reports noted.
Is Yum a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on YUM stock based on six Buys and 13 Holds assigned in the past three months, as indicated by the graphic below. After a 14.43% rally in its share price over the past year, the average YUM price target of $160.13 per share implies 8.87% upside potential.
