Back to top

Image: Bigstock

Yum China (YUMC) to Report Q4 Earnings: What's in Store?

Read MoreHide Full Article

Yum China Holdings, Inc. (YUMC - Free Report) is scheduled to report fourth-quarter 2020 results on Feb 3, after market close.

In the last reported quarter, the company’s sales and earnings outperformed the Zacks Consensus Estimate by 4% and 43.5% and increased 1.3% and 13.8% on a year-over-year basis, respectively.

Trend in Estimate Revision

The Zacks Consensus Estimate for revenues is pegged at $2.16 billion, suggesting a 6.4% year-over-year increase. Earnings estimates for fourth-quarter 2020 have moved up to 24 cents from 22 cents over the past 30 days, suggesting a 4% decline from the year-ago 25 cents.

Yum China Holdings Inc. Price and EPS Surprise

 

Yum China Holdings Inc. Price and EPS Surprise

Yum China Holdings Inc. price-eps-surprise | Yum China Holdings Inc. Quote

Factors to Consider

Yum China’s top line in the quarter is likely to have been driven by unit expansion efforts, menu innovation and robust digitalization. The company is increasingly shifting toward digital and content marketing to expand customer base. It has adopted a high-grade delivery strategy that includes collaborating with aggregators to source traffic and fulfilling orders by the company’s KFC riders. This is anticipated to have aided the company in driving volume.

Digital orders during the third quarter, which accounted for 78% of KFC and Pizza Hut's Company sales, are likely to have continued to be robust during the fourth quarter. The company’s results in the quarter are likely to have been benefited from robust KFC and Pizza Hut loyalty programs. In the third quarter, KFC and Pizza Hut member sales accounted for nearly 60% system sales. During third-quarter 2020, the company sold 19 million privilege memberships at KFC and Pizza Hut.

The Zacks Consensus Estimate for KFC revenues is currently pegged at $1,510 million, indicating growth of 12.4% from the prior-year quarter. Moreover, the consensus estimate for Pizza Hut revenues is pegged at $457 million, suggesting no change year over year.

However, in the fourth quarter, the company’s same-store sales are expected to be under pressure owing to closure of various restaurants and limitations on the use of dining rooms. Although the situation in China is under control and the company has opened its restaurants, dismal traffic is likely to hurt the company’s same-store sales for the upcoming quarters. Moreover, higher costs are likely to have negatively impacted the company’s bottom line.

What Our Model Indicates

Our proven model does not conclusively predict an earnings beat for Yum China this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

Earnings ESP: Earnings ESP for Yum China is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Zacks Retail - Restaurants space that investors may consider as our model shows that these have the right combination of elements to post earnings beat in the upcoming releases:

Darden Restaurants, Inc. (DRI - Free Report) has a Zacks Rank #3 and an Earnings ESP of +35.49%.

Wingstop Inc. (WING - Free Report) has an Earnings ESP of +20.00% and a Zacks Rank #3.

Papa John's International, Inc. (PZZA - Free Report) has a Zacks Rank #3 and an Earnings ESP of +1.48%.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all. You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>