It has been about a month since the last earnings report for Yum China Holdings (YUMC Quick QuoteYUMC - Free Report) . Shares have added about 19% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Yum China due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Yum China Q3 Earnings Top, Revenues Lag Estimates

Yum China reported mixed third-quarter 2022 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same. However, both metrics increased on a year-over-year basis.

During the quarter under discussion, the company's operations were affected by the coronavirus. Tightened COVID curbs were implemented to counter the same. The measures paved a path for restricted mobility and reduced travel.

In September, nearly 900 stores were temporarily closed or provided only takeaway and delivery services compared with roughly 400 stores on average in July and August. In October, nearly 1,400 stores were either temporarily closed or offered only takeaway and delivery services due to an increase in new infections.

Earnings & Revenue Discussion

During third-quarter 2022, the company reported adjusted diluted earnings per share of 49 cents. The figure surpassed the Zacks Consensus Estimate of 32 cents. In the prior-year quarter, the company had reported adjusted earnings of 22 cents.

Quarterly revenues of $2,685 million missed the consensus mark of $2,689 million. However, the top line increased 5% on a year-over-year basis. Excluding foreign currency translation, the top line fell 11% year over year.

Total system sales in the reported quarter rose 5% year over year. System sales at KFC and Pizza Hut increased 5% and 7%, respectively. Same-store sales were flat year over year, primarily due to flat comps at KFC and a 2% increase at Pizza Hut.

Operating Highlights

During third-quarter 2022, total costs and expenses totaled $2,369 million compared with $2,376 million reported in the prior-year quarter.

The restaurant margin in the quarter under review was 18.8%, up 660 basis points from the year-ago quarter's levels. The upside was due to cost savings and improving efficiencies.

During the quarter, adjusted operating profit totaled $318 million, up 89% from the year-ago quarter's levels. Adjusted net income amounted to $208 million compared with $96 million reported in the prior-year quarter.

Balance Sheet

As of Sep 30, 2022, cash and cash equivalents amounted to $1,211 million compared with $1,136 million as of Dec 31, 2021. Inventories during the second quarter were $321 million compared with $432 million as of Dec 31, 2021.

During the third quarter, the company repurchased $13 million worth of shares at an average price of $48.05. As of Sep 30, the company had approximately $1.2 billion available for the buyback program.

The company declared a quarterly cash dividend of 12 cents per common share. The dividend will be payable on Dec 20, 2022, to shareholders of record as of Nov 29, 2022.

Unit Development and Other Updates

During third-quarter 2022, Yum China opened 403 gross new restaurants, driven by the development of the KFC and Pizza Hut brands. As of Jun 30, the company's total restaurant count was 12,409.

During the quarter under review, delivery accounted for nearly 38% of KFC and Pizza Hut's company sales, up nearly four percentage points from the prior-year quarter's levels.

Digital orders during the quarter contributed 91% to KFC and Pizza Hut's company sales. During the third quarter, KFC and Pizza Hut’s loyalty programs increased to more than 400 million members.

2022 Outlook

In 2022, Yum China continues to anticipate opening approximately 1,000-1,200 new stores. The company expects solid expansion in KFC and Pizza Hut stores. Capital expenditures in 2022 are expected in the range of $800-$1000 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision flatlined during the past month.

The consensus estimate has shifted -25% due to these changes.

VGM Scores

At this time, Yum China has a strong Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Yum China has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Yum China belongs to the Zacks Retail - Restaurants industry. Another stock from the same industry, BJ's Restaurants (BJRI Quick QuoteBJRI - Free Report) , has gained 4.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

BJ's Restaurants reported revenues of $311.35 million in the last reported quarter, representing a year-over-year change of +10.3%. EPS of -$0.25 for the same period compares with -$0.13 a year ago.

For the current quarter, BJ's Restaurants is expected to post earnings of $0.08 per share, indicating a change of +140% from the year-ago quarter. The Zacks Consensus Estimate has changed -6.6% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for BJ's Restaurants. Also, the stock has a VGM Score of D.