Bear Stearns upgraded Yum Brands (YUM ) to outperform from peer perform.
Analyst Joseph Buckley says shares are trading at 11 times his new $2.09 2003 earnings per share estimate (up from $2.07), and the stock sells at the low end of valuations typically accorded quick service restaurants stocks, well below Yum's five-year average.
He says earnings per share growth should be consistent -- 10% earnings per share growth is highly likely and mid-teen percent growth is attainable. He thinks the company's portfolio of brands enhances its earnings per share consistency. Brands include Kentucky Fried Chicken, Pizza Hut, and Taco Bell.
Buckley says the company's multi-branding strategy has the potential to drive sales and earnings per share, as well as improve returns on existing assets. He also notes Yum's growing international business, buybacks, and debt reduction.