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YUM! Brands (YUM) to Post Q2 Earnings: What's in Store?

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YUM! Brands, Inc. (YUM - Free Report) is scheduled to report its second-quarter 2022 result on Aug 3, before the opening bell. In the last reported quarter, the company’s bottom line beat the Zacks Consensus Estimate by 1.9%.

Q2 Estimates

The Zacks Consensus Estimate for second-quarter earnings per share is pegged at $1.08, indicating a decline of 6.9% from the prior-year quarter. The consensus mark for revenues stands at $1.66 billion, suggesting growth of 3.5% from $1.60 billion in the prior-year quarter.

Factors to Note

Yum! Brands’ second-quarter 2022 performance is likely to have benefited from robust same-store sales growth, expansion efforts and strong off-premise ordering channels. The company’s result in the quarter is also likely to have been aided by improvement in the nutritional value of its menu items, coupled with its distinctive plant-based offerings (such as KFC's Beyond Fried Chicken in the U.S. and Pizza Hut’s Beyond Italian Sausage Crumbles in Canada). Moreover, the strong performance of Taco Bell is likely to have driven the company’s top line.

The company’s comps in the quarter are likely to have been aided by recovery in emerging markets. Increased focus on delivery service channel and e-commerce platform bodes well for the company. Backed by solid customer acceptance (regarding easy access to brands) and the advancement of the digital and technology ecosystem, the initiatives are likely to have boosted the company’s performance in the to-be-reported quarter.

Yum! Brands continues to innovate core menus to attract customers. During first-quarter 2022, Habit restaurants added two new items, namely, Crispy Chicken Sandwich and Chicken Bites. Also, KFC continues to focus on menu innovation through rebundling, repackaging and reconceptualizing core menu items. Menu innovation continues to drive the company’s top line.

Our estimate showcases an increase of 8.4% to $739 million in the KFC segment and a gain of 3.7% to $258.1 million in the Pizza Hut segment for the quarter under discussion. We expect Taco Bell and Habit Burger Grill revenues to increase 3.6% and 6.9% year over year to $551.4 million and $148.6 million, respectively.

However, rising inflation levels are likely to have impacted margins in the to-be-reported quarter. An increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs put significant pressure on the company’s margins. A competitive retail environment weighed on the restaurants’ costs. The company is susceptible to profit margin pressure due to relentless expansion.

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

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

What the Zacks Model Unveils

Our proven model predicts an earnings beat for Yum! Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.

Earnings ESP: Yum! Brands has an Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, of +2.14%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Other Stocks Poised to Beat Earnings Estimates

Here are some other stocks from the Zacks Retail-Wholesale sector that investors may consider as our model shows that these too have the right combination of elements to post an earnings beat in the quarter to be reported:

The Wendy's Company (WEN - Free Report) has an Earnings ESP of +0.46% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Wendy's have declined 8.8% in the past year. WEN’s earnings surpassed the consensus mark in three out of four quarters and missed once, the average being 14.2%.

Ulta Beauty (ULTA - Free Report) currently has an Earnings ESP of +2.24% and a Zacks Rank #2. The company is likely to register bottom-line improvement when it reports second-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for quarterly earnings per share of $4.78 suggests an improvement of 4.8% from the year-ago quarter.

Ulta Beauty's top line is expected to rise year over year. The Zacks Consensus Estimate for quarterly revenues stands at $2.18 billion, which indicates an improvement of 10.8% from the figure reported in the prior-year quarter. ULTA has a trailing four-quarter earnings surprise of 49.8%, on average.

The Children's Place (PLCE - Free Report) currently has an Earnings ESP of +1.03% and a Zacks Rank #3. The company is likely to register a decline in the bottom line when it reports second-quarter fiscal 2022 numbers. The Zacks Consensus Estimate for quarterly earnings per share of 97 cents suggests a decline from $1.71 reported in the year-ago quarter.

The Children's Place’s top line is expected to decline year over year. The Zacks Consensus Estimate for quarterly revenues is pegged at $395.6 million, which indicates a decline of 4.4% from the figure reported in the prior-year quarter. PLCE has a trailing four-quarter earnings surprise of 58%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.