KFC is based in Louisville,
Kentucky; Pizza Hut and Tricon Restaurants International are
headquartered in Dallas, Texas; and Taco Bell is based in Irvine,
Each of Tricon's four operating divisions is engaged in the
operation, development, franchising and licensing of a system
of both traditional and non-traditional QSR units.
Non-traditional units include express units and kiosks which have
a more limited menu and operate in non-traditional locations like
airports, gas and convenience stores, stadiums, amusements parks
and colleges, where a full-scale traditional outlet would not be
practical or efficient. In addition, there are approximately
367 units housing more than one concept. Of these, approximately
354 units offer both the full KFC menu and a limited menu of
Taco Bell products, and approximately 13 units offer both the
full KFC menu and a limited menu of Pizza Hut products.
In each concept, consumers can either dine in or carry out food.
In addition, Taco Bell and KFC offer a drive-through option in
many stores. Pizza Hut and, on a much more limited basis, KFC
offer delivery service.
Each concept has proprietary menu items and emphasizes the
preparation of food with high quality ingredients as well as
unique recipes and special seasonings to provide appealing,
tasty and attractive food at competitive prices.
Reasons To Invest
It may have been famed investor Peter Lynch who said, "Invest
in what you know." And for many Americans and, in fact,
consumers worldwide, it's hard not to know Tricon's global
brands. While the company's corporate name may be unfamiliar
to some, its brands such as KFC, Pizza Hut and Taco Bell should
be very familiar to those who partake of fast food.
Tricon is the #2 restaurant in the United States, behind
rival McDonalds (NYSE:MCD). The company and its shares have
performed relatively well during the economic downturn, which
has afflicted so many other industries and innumerable
companies. There are several factors that lend to Tricon's
out performance in terms of both share price appreciation and
improvement in underlying fundamentals.
For starters, it doesn't seem likely that consumers would
limit their purchases of sub-$1 food products. After all,
you can pick up a taco at Taco Bell for a mere $0.59. If
anything, the company would benefit from the slowdown in that
consumers would be more likely to buy a cheaper fast food
meal than dish out more cash at a higher-end restaurant.
In addition, Tricon has employed several effective advertising
campaigns recently. And judging by recent same-store-sales
figures, the ads are more than working. For example, at its
Pizza Hut chains, Tricon has embarked on a campaign to
advertise its new extra-cheesy Stuffed Crust and Twisted
Crust pizza offerings. And at its Taco Bell establishments,
Tricon has extensively advertised its Chalupa and new Grilled
Stuft Burrito. As far as DripAdvisor is concerned, the new
Stuft Burritos are quite delectable.
Astute investors may point to the recent advance in shares of
Tricon and the fact that the stock is hovering near a 52-week
high. After all, the point is to buy cheap and sell dear.
But it may also be pertinent to point out the fact that despite
their recent rise, shares of Tricon trade with a modest
valuation, especially after taking into account the company's
expected earnings growth rate. Tricon is expected to blossom
its bottom-line by roughly 15 percent over the next five years.
While not the break-neck growth delivered by higher beta names
in the technology space, Tricon's steady delivery of solid
financial performance should reward investors over a long
period of time. And prove to be a valuable means of
diversifying risk away from positions that are more
susceptible to the ebbs and flows of the global economy and
Finally, although Tricon DOES NOT pay a dividend to its
shareholders, the company does offer investors a means of
purchasing shares directly. Unlike many companies, Tricon
does not charge any fees for this service.
Shares to Qualify = 1 Accept Foreign Accounts: Yes
Auto-reinvestment = Yes Temper Enrollment Serv: Yes
Min/Max Investment = $20 to $5,000/month
Dividend: 0 Cash: 0 Auto ReInvest: 0
Industry Group: Restaurants 52-week high=$45.29
Annual Dividend Per Share=$0.00 52-week low =$23.56
Last earnings 05/01 est= 0.59 actual= 0.59
Next earnings 08-01 est= 0.72 versus= 0.76
P/E = 17
Strong Buy = 3
Moderate Buy = 3
Hold = 6
Moderate Sell = 0
Strong Sell = 0