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YUM! Brands (YUM) Stock Up on Q3 Earnings & Revenues Beat

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YUM! Brands, Inc. (YUM - Free Report) reported strong third-quarter 2020 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Both the metrics also improved year over year. Following the results, the company’s shares are up 2.2% in pre-market trading session.

Strong digital sales, and the company capabilities to adjust operations, menu options and marketing worldwide helped it amid the challenging scenario. Digital sales increased more than $1 billion for the second straight quarter over the prior year.

The company’s adjusted earnings of $1.01 beat the Zacks Consensus Estimate of 79 cents. In the prior-year quarter, the company had reported adjusted earnings of 80 cents.

YUM! Brands’ total revenues of $1,448 million surpassed the consensus estimate of $1,439 million. The top line also improved 8% year over year. The upside can be attributed to increase in company sales.

Yum Brands, Inc. Price, Consensus and EPS Surprise

Yum Brands, Inc. Price, Consensus and EPS Surprise

Yum Brands, Inc. price-consensus-eps-surprise-chart | Yum Brands, Inc. Quote

Worldwide system sales — excluding foreign currency translation — inched up 1% year over year with Taco Bell increasing 5%. However, this was overshadowed by 1% and 4% decline at KFC and Pizza Hut, respectively.

Divisional Performance

YUM! Brands primarily reports results under three divisions — KFC, Pizza Hut and Taco Bell.

For third-quarter 2020, revenues from KFC totaled $586 million, down 4% year over year. Comps at this division declined 4% against the year-ago quarter’s growth of 3%.

This segment’s operating margin expanded 290 basis points (bps) year over year to 47.2% primarily due to international franchise bad debt recoveries.
In the quarter under review, KFC Division opened 358 gross new restaurants in 45 countries.

At Pizza Hut, revenues amounted to $243 million, up 1% on a year-over-year basis. Comps declined 3% in the reported quarter. Notably, comps were flat in the year-ago quarter.

The segment’s operating margin was up 70 bps year over year to 36.7% owing to U.S. franchise bad debt recoveries, which mitigated dismal international same-store sales.

Pizza Hut Division opened 148 gross new restaurants in 32 countries during the third quarter.

Taco Bell’s revenues were $501 million, up 2% from the year-ago quarter. Comps rose 3% in the reported quarter compared with the year-ago quarter’s growth of 4%. Its operating margin was up 430 bps year over year to 37.2%. It was primarily driven by lower general and administrative expenses, same-store sales increase, and higher company restaurant margins in the reported quarter.

Taco Bell recorded five gross new restaurants openings  in  the United States and China during the quarter under review.

Other Financial Details

Cash and cash equivalents as of Sep 30, 2020, totaled $1,110 million compared with $605 million on Dec 31, 2019. Long-term debt at the end of the reported quarter was $10,647 million compared with $10,131 million at 2019-end.

Zacks Rank & Other Key Picks

Yum! Brands, which shares space with McDonald's Corporation (MCD - Free Report) , carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other stocks, which warrant a look in the same space include Brinker International, Inc. (EAT - Free Report) and Fiesta Restaurant Group, Inc. (FRGI - Free Report) , each sporting a Zacks Rank #1.

Brinker has a three-five-year earnings per share growth rate of 12.7%.

Fiesta Restaurant anticipates 2021 earnings to surge 260.7%.

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