YUM! Brands, Inc. (YUM Quick QuoteYUM - Free Report) reported strong third-quarter 2021 results, with earnings and revenues surpassing the Zacks Consensus Estimate. Both the metrics improved year over year.

The company’s results in the quarter benefited from strong digital sales, robust unit development and a diversified global business model. The company strengthened its digital capabilities with the acquisition of Dragontail that features AI-based integrated kitchen order management and delivery technologies. The initiative paves a path for strengthening store operations and enhancing customer experience. During the quarter, the company reported digital sales of more than $5 billion.

Earnings and Revenue Discussion

During third-quarter 2021, the company’s adjusted earnings of $1.22 beat the Zacks Consensus Estimate of $1.06. In the prior-year quarter, the company had reported adjusted earnings of $1.01.

Yum Brands, Inc. Price, Consensus and EPS Surprise

 

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

Quarterly revenues of $1,606 million surpassed the consensus estimate of $1,584 million. The top line increased 11% year over year. The upside can be attributed to an increase in company sales as well as a rise in franchise and property revenues.

Worldwide system sales — excluding foreign currency translation — increased 8% year over year with Taco Bell, KFC and Pizza Hut increasing 8%, 11% and 4%, respectively, year over year.

Divisional Performance

YUM! Brands primarily announces results under four divisions — KFC, Pizza Hut, Taco Bell and Habit Burger Grill.

For third-quarter 2021, revenues from KFC totaled $692 million, up 18% year over year. Comps in the division increased 6% year over year against the year-ago quarter’s decline of 4%.

The segment’s operating margin declined 180 basis points (bps) year over year to 45.4%. The downside was primarily caused by the lapping of bad debt recoveries, partially offset by system sales growth. In the quarter under review, KFC Division opened 636 gross new restaurants.

At Pizza Hut, revenues amounted to $247 million, up 2% on a year-over-year basis. Comps increased 4% in the reported quarter versus a 3% fall in the prior-year quarter.

The segment’s operating margin expanded 390 bps year over year to 40.6%. The upside was driven by solid same-store sales. Pizza Hut Division opened 297 gross new restaurants during the third quarter.

Taco Bell’s revenues were $534 million, up 6% from the year-ago quarter’s levels. Comps in the segment increased 5% year over year compared with 3% growth reported in the year-ago quarter. Its operating margin declined 260 bps year over year to 34.6%. The downside was due to higher general and administrative expenses, partially offset by comps growth.

Taco Bell opened 74 gross new restaurants during the quarter under review.

The Habit company sales amounted to $132 million during the third quarter. Comps in the division increased 11% year over year. In the quarter, the company opened eight gross new restaurants in the United States.

Other Financial Details

As of Sep 30, 2021, cash and cash equivalents totaled $1,001 million compared with $730 million on Dec 31, 2020. Long-term debt at the end of the reported quarter was $11,189 million compared with $10,272 million at 2020-end.

Zacks Rank & Key Picks

Yum! Brands carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Zacks Retail - Restaurants industry space are Noodles & Company (NDLS Quick QuoteNDLS - Free Report) , Dave & Buster's Entertainment, Inc. (PLAY Quick QuotePLAY - Free Report) and Papa John's International, Inc. (PZZA Quick QuotePZZA - Free Report) , each carrying a Zacks Rank #2 (Buy).

Noodles & Company’s 2021 earnings are expected to surge 182.8%.

Dave & Buster's has a trailing four-quarter earnings surprise of 201.8%, on average.

Papa John's has three-five-year earnings per share growth rate of 15%.