C = Catalyst for a Stock’s Movement
Yum is a quick-service restaurant company that operates KFC, Pizza Hut, and Taco Bell restaurants worldwide. As consumers become increasingly more time-sensitive, Yum stands ready to provide fast, easy, and inexpensive food options. Look for Yum Brands to continue its dominance in the fast food industry.
T = Technicals on the Stock Chart are Mixed
Yum has been in a consistent uptrend since its initial public offering. The stock has seen some pullbacks through the years but they have not taken much from the large move it has already made. Currently, Yum’s stock has pulled back and is consolidating. Look for a pattern of higher highs and higher lows to continue in this stock.
Let’s take a look at key simple moving averages in order to evaluate Yum’s price momentum. The stock is currently trading around the 50-day, 100-day, and 200-day simple moving averages. Since the key averages are swinging around each other, this signals continued consolidation. Wait for price to digest before Yum’s stock moves higher.
A relatively simple way to gain perspective into investor sentiment is through the use of the options market. More specifically, taking a look at the implied volatility and implied volatility skew levels of Yum options may help determine if investors are bullish, neutral, or bearish. The implied volatility of Yum options is at 26.26 percent today, which coincides with a 73rd percentile over the last 30 trading days and 66th percentile over the last 90 trading days. What does this mean? This means that investors or traders are buying a good number of call and put options contracts as compared to the last 30 and 90 trading days.
The implied volatility skew of April and May put options is fairly steep, while call options skew is average. So, as of today, there is an average demand from call buyers or call sellers and high demand from put buyers or low demand from put sellers, all neutral to bearish over the next two months. Investors are leaning neutral to bearish over the next two months, normal during consolidating times.
E = Earnings Are Increasing Quarter-Over-Quarter
An increasing stock price is strongly correlated with rising earnings and revenue growth rates. What do the last four quarterly earnings and revenue growth figures for Yum look like? The last four quarterly earnings growth (Y-O-Y) rates have been: -2.67, 25, 6.15, and 77.78 percent, while the last four revenue growth (Y-O-Y) rates have all been: 1.02, 9.01, 12.5, and 13.11 percent. Yum has displayed great earnings and revenue growth figures.
Let’s see how the markets liked these numbers. The last four quarterly earnings announcement reactions help gauge investor sentiment on Yum’s stock. The last four quarters have seen next trading session returns of 8.05, 0.47, -2.09, and 2.01 percent. The markets have generally been very pleased with Yum’s earnings announcements.
E = Excellent Relative Performance Versus Peers and Sector
Yum and other fast food restaurants have been performance leaders, but how has its stock done relative to its peers and sector? Year-to-date, the stock is returning 7.8 percent, while its competitors McDonald’s (NYSE:MCD), Jack In The Box (NASDAQ:JACK), Wendy’s (NASDAQ:WEN), and the sector are returning 9.69, 14.31, 16.38, and 8.94 percent respectively. Yum has seen strong returns year-to-date, but has trailed its industry and peers.
The fast food movement is seeing strong growth signs, so Yum has enjoyed the ride. The stock has been in a consistent uptrend throughout the years but it is currently digesting gains. Earnings and revenue growth rates have pleased investors, who have, in turn, supported the stock. However, Yum has trailed its peers and competitors year-to-date. Look for Yum to play catch-up and OUTPERFORM.
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