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Yum! Brands (YUM) Beats on Q1 Earnings, Revenues Down Y/Y

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Yum! Brands, Inc. (YUM - Free Report) posted better-than-expected first-quarter 2017 results with both earnings and revenues surpassing the Zacks Consensus Estimate.

Earnings and Revenues Discussion

Adjusted earnings of 65 cents per share surpassed the Zacks Consensus Estimate of 60 cents by 8.3%. Further, earnings increased 17% year over year due to lower share count.

Total revenues of $1.42 billion were down 1.8% year over year, primarily owing to lower company sales. However, revenues came in above the Zacks Consensus Estimate of nearly $1.35 billion by over 5%.

Comps Discussion

From Jan 2016, the company’s India business integrated its three restaurant brands into the global KFC, Pizza Hut and Taco Bell divisions. In fact, Yum! Brands’ had completed the spin-off of the China business into an independent, publicly-traded company on Oct 31, 2016. Post-separation Yum! Brands now reports under three segments – KFC, Pizza Hut and Taco Bell.

The company aims to drive growth at KFC, Pizza Hut and Taco Bell brands via its strategic transformation plan, following the separation of the company’s all-important China division. Notably, the company’s transformation and growth strategy entails employing greater focus on the development of its three iconic global brands, increasing its franchise ownership and creating a leaner and more efficient cost structure.

Comps at the KFC division were up 2% lower than the year-ago quarter and last quarter’s growth of 3%. Growth was witnessed across the U.S. as well as developed and emerging markets internationally.

Pizza Hut comps decreased 3% comparing unfavorably with comps decline of 1% in the year-ago quarter as well as last quarter’s decline of 2%. Comps grew 2% and 1% in international emerging and international developed markets, respectively, but declined 7% in the U.S.

Taco Bell comps increased 8%, better than comps growth of 1% a year ago and 3% in the preceding quarter. The upside was driven on the back of industry-leading value and innovation in the quarter.

While restaurant margins improved at KFC and Taco Bell, it declined significantly at the Pizza Hut division.

Yum! Brands, Inc. Price, Consensus and EPS Surprise

 

Yum! Brands, Inc. Price, Consensus and EPS Surprise | Yum! Brands, Inc. Quote

Zacks Rank & Stocks to Consider

Yum! Brands has a Zacks Rank #3 (Hold). Better-ranked stocks in this sector include Restaurant Brands International Inc. (QSR - Free Report) , Darden Restaurants, Inc. (DRI - Free Report) and Yum China Holdings, Inc. (YUMC - Free Report) . While Restaurant Brands sports a Zacks Rank #1 (Strong Buy), Darden and Yum China carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Restaurant Brands’ earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 7.41%. For 2017, EPS is expected to grow a solid 20%.

The Zacks Consensus Estimate for Darden’s fiscal 2017 earnings has increased 1.8%, in the last 60 days. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, with an average beat of 3.35%.

The Zacks Consensus Estimate for Yum China’s 2017 earnings has increased 4.4% in the last 60 days. Moreover, for 2017, EPS is expected to improve 10.7%.

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