Why Is Yum (YUM) Down 3.1% Since Last Earnings Report?

Yum Brands (YUM) shares have declined 3.1% in the past month, underperforming the S&P 500, with estimates trending downward, leading to a Zacks Rank #3 (Hold) and an expectation of in-line returns in the near term. In comparison, Starbucks (SBUX), another stock in the same industry, has gained 2.5% over the past month, though its estimates have also been revised downwards, resulting in a Zacks Rank #4 (Sell).

Analysis

Yum Brands (YUM) has experienced a 3.1% decline in its share price over the past month since its last earnings report, underperforming the S&P 500. This movement coincides with a downward trend in fresh earnings estimates, signaling a potential reassessment of its near-term prospects by analysts. While Yum currently holds a strong Growth Score of A and a respectable Momentum Score of B, its Value Score is a D, placing it in the bottom 40% for that investment style, culminating in an overall VGM Score of B. Consequently, Yum carries a Zacks Rank #3 (Hold), suggesting expectations for an in-line market return in the coming months. In contrast, Starbucks (SBUX), a peer in the Zacks Retail - Restaurants industry, saw its shares gain 2.5% over the same period. However, Starbucks faces its own challenges; its last reported quarterly revenue was $8.76 billion, a modest 2.3% year-over-year increase, while its EPS of $0.41 was significantly lower than the $0.68 reported a year ago. For the current quarter, Starbucks' EPS is projected at $0.66, a substantial 29% decrease year-over-year, and its Zacks Consensus Estimate has been revised downward by 18.5% in the last 30 days. These factors contribute to Starbucks' Zacks Rank #4 (Sell) and a very weak VGM Score of F, indicating more significant headwinds despite its recent stock price uptick.

Key Decisions for Investors

• Given Yum Brands' Zacks Rank #3 (Hold) and downward estimate revisions despite a strong Growth Score, investors might consider maintaining current positions while closely monitoring upcoming earnings and analyst sentiment for signs of a breakout or further deterioration.
• For Starbucks, the Zacks Rank #4 (Sell), significant negative EPS revisions, a substantial expected earnings decline, and a poor VGM Score suggest a cautious approach; existing investors may want to re-evaluate their holdings in light of these deteriorating fundamentals.
• The downward trend in earnings estimates for both companies could indicate broader pressures within the retail restaurant sector, warranting a closer examination of other holdings in this industry for similar estimate revision trends.