Goldman Sachs advises buying shares of KFC's owner. What makes the company better than its competitors?

Yum! Brands, which owns KFC, Pizza Hut and Taco Bell restaurants, has an advantage over its competitors, according to Goldman Sachs. The bank's analysts raised their recommendation on the company's shares from «neutral» to «buy» and recommend investors to pay attention to the speed with which the chain is opening new restaurants, writes CNBC.

Goldman Sachs analyst Christine Cho raised her rating on Yum! Brands from «neutral» to «buy,» but kept her target price on the stock at $167, which implies a 16% increase in the stock price.

The stock price of the owner of KFC, Pizza Hut and Taco Bell was little changed in trading on June 4, ending the day at $144.

According to Cho, Yum! Brands is growing faster than its competitors. The main driver of growth in the first quarter was the KFC chain: it added 528 new restaurants worldwide, which was the second largest result in the brand's history in the first quarter. China remains a key market for the company: 50% to 60% of new outlets per year are opened in this country.

«In addition, management plans to triple Taco Bell's international network, from 1,150 restaurants in 2024 to more than 3,000 by 2030. At the same time, more than 40% of openings will be in the brand's four main markets: the UK, Spain, Australia and India. There are also plans for restaurants in France, Poland, Germany, South Africa, Turkey, UAE, Greece, Ireland and Sweden,» Cho wrote in a memo quoted by CNBC.

The analyst emphasized that the high share of franchising and geographical diversification of business help Yum to insure against macroeconomic instability. Although the company's international presence raises concerns about possible boycotts against the backdrop of U.S. trade policy, the attitude of foreign consumers to the U.S. has not yet had any impact on Yum's revenue, said the Goldman Sachs analyst.

She paid particular attention to Taco Bell, calling the brand a «unique leader in the affordable food segment» with strong consumer loyalty. «While Yum is not immune to weak consumer demand and increasing competition in the domestic market (especially as its brands target lower-income consumers), Taco Bell has repeatedly delivered outstanding results in the past in the face of fierce price competition,» Cho wrote.

It expects Taco Bell to continue to strengthen its position in the U.S. through consistent offerings at an affordable price point.

Since the beginning of the year, Yum shares have gained 7.3%, slightly behind McDonald's, whose shares have strengthened 7.5%. Both companies outperformed Restaurant Brands International, which owns Burger King, with its shares up 4.5%.

McDonald's on May 3  announced the return of Snack Wrap chicken rolls to its menu to attract low-income customers. Snack Wrap is the equivalent of the twister from KFC. The return of the popular product could help McDonald's regain the momentum it lost after the intestinal infection outbreak, according to Jefferies. The company announced that it plans to open about 2,200 new restaurants in 2025, including more than 1,600 in emerging markets, including 1,000 in China. However, the company did not release the chain's same-quarter growth figures. In 2024, the net growth of the chain's restaurants (excluding closed restaurants) was 1.65 thousand.

Restaurant Brands International did not disclose the exact number of new restaurants in its report for the first quarter of 2025. However, at the end of the quarter, the overall chain grew 3.3% year-on-year, which implies year-over-year growth, without a quarterly breakdown, of 1,000 establishments.

The Yum chain has grown by 4,500 restaurants in the past year. However, most analysts tracking Yum! Brands shares are taking a wait-and-see stance: according to LSEG, 23 out of 30 recommend «hold» Yum securities, while the remaining seven recommend «buy.» There are no «sell» valuations on Yum. The Wall Street consensus price target of $160.4 implies the securities of the owner of KFC, Pizza Hut and Taco Bell are up more than 11%.