LOUISVILLE, Ky. -- Climbing for more than a month, the stock price of Tricon Global Restaurants Inc. (YUM: NYSE) set a 52-week high on Nov. 6.
Tricon, the parent of Taco Bell, KFC and Pizza Hut restaurants, closed at $52.40 per share, up $1.13 per share. The stock price, which has risen almost 30 percent in four weeks, hadn't closed above $50 per share since July '99. (For up-to-date stock reports every 15 minutes, see PizzaMarketplace's stock ticker on our home page.)
On Nov. 7, Reuters reported that Lehman Brothers lowered its rating on Tricon to "buy" from "strong buy," saying the company is well-positioned, but already has reached price targets. A Lehman Brothers spokesperson said Tricon's price-to-earnings multiples have evened out with its peers, and that it is "well-positioned in the current environment."
Tony Howard, a restaurant analyst for Louisville brokerage Hilliard Lyons Inc., told Business First that the upswing in Tricon's price is attributable to improved sales at casual-dining restaurants. Howard, who rates the company as a "hold," said also some of the lift has come from improved management and sales in its Taco Bell division. The fast-Mex concept has suffered consistent losses all year. Earlier this year, the company's sales plunged after it was discovered that bio-engineered corn, originally meant for cattle feed, was used mistakenly in manufacturing some of its tortilla products.
"We like the stock a lot," Howard said. "Right now, we have a target price of $52, but we've had to raise the target a couple of times this year."
Last month, Tricon said its blended domestic same-store sales increased 2 percent during the four-week period ended Oct. 6. The rise included sales increases of 8 percent at KFC and 4 percent at Taco Bell.
"It appears they're finally turning things around at Taco Bell," Howard said.
The only low spot in the company's sales report was a drop of 6 percent at Pizza Hut, which Tricon attributed to a week-long lapse in product promotion in September.
Additionally, Tricon reported that its third-quarter net income rose to $124 million, or 81 cents per share, diluted, from $59 million, or 40 cents per share, diluted, a year earlier. In its quarterly report filed in October, Tricon confirmed its earnings estimate of $3.18 per share for 2001.
Howard did warn that the Tricon stock price may "be getting a little ahead of itself" by climbing as quickly as it has. Nearly a year ago Tricon Global traded at its 52-week low $29.38 per share, and early in October, the stock traded below $40 per share.
Still, he remains optimistic about the company.
"Things are clicking pretty well in all three divisions," he said.