A month has gone by since the last earnings report for Yum Brands (YUM Quick QuoteYUM - Free Report) . Shares have added about 2.8% 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 due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

YUM! Brands Q3 Earnings and Revenues Lag Estimates

YUM! Brands reported lackluster third-quarter 2024 results, with adjusted earnings and total revenues missing the Zacks Consensus Estimate. On a year-over-year basis, the bottom line declined, while the top line grew.

The top-line performance reflects solid contributions from the company’s Taco Bell and KFC divisions. The increased unit growth in KFC International added to the uptrend of this division. Yet, the uptrend was offset to some extent by soft contributions from the Pizza Hut division. The worldwide comps declined 2% year over year.

Moreover, increased company restaurant expenses and franchise and property expenses marred the bottom line. Also, unfavorable foreign currency translation impacted the quarter’s performance.

Nonetheless, increased new unit counts, drive-thru Voice AI technology expansion at Taco Bell and other strategic initiatives are likely to aid the company’s performance in upcoming quarters amid the ongoing geopolitical conflicts and challenged consumer sentiment.

YUM’s Earnings and Revenue Discussion

Adjusted earnings per share (EPS) of $1.37 missed the Zacks Consensus Estimate of $1.41 by 2.8%. In the prior-year quarter, the company reported an adjusted EPS of $1.44.

Quarterly revenues of $1.826 billion also missed the consensus mark of $1.889 billion by 3.3% but grew 7% year over year.

Worldwide system sales — excluding foreign currency translation — increased 1% year over year, with Taco Bell rising 5% and KFC rising 1%. The metric declined 1% year over year for Pizza Hut.

Divisional Performance of YUM

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

KFC: Revenues at the KFC division totaled $785 million, up 12% year over year. Our model predicted the metric to increase 8.3% from a year ago. Comps decreased 4% year over year against a gain of 6% reported in the prior-year quarter.

The division’s operating margin contracted 610 basis points (bps) year over year to 43.1%. In the quarter, the KFC division opened 685 gross new restaurants across 65 countries.

Pizza Hut: This division’s revenues amounted to $238 million, down 1% year over year. Our model predicted the metric to increase 3.4% from the prior-year level. Comps decreased 4% year over year against growth of 1% in the year-ago quarter.

The division’s operating margin contracted 200 bps year over year to 38.3%. Pizza Hut division opened 292 gross new restaurants across 36 countries.

Taco Bell: The quarterly revenues of this division were $666 million, up 6% year over year. Our model precited the metric to increase 9% from the year-earlier level. Comps increased 4% year over year compared with 8% in the prior-year quarter.

The division’s operating margin expanded 160 bps year over year to 37.6%. Taco Bell opened 49 gross new restaurants across 15 countries.

Habit Burger Grill: The division’s revenues amounted to $137 million, flat year over year. Our model predicted the metric to increase 21.6% year over year.

Comps declined 5% year over year. In the quarter, the division opened three gross new restaurants.

Other Financial Details of YUM! Brands

As of Sept. 30, 2024, the company’s cash and cash equivalents totaled $457 million compared with $512 million at 2023-end. Long-term debt, as of the end of the third quarter, was $11.169 billion compared with $11.142 billion at 2023-end.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -6.17% due to these changes.

VGM Scores

Currently, Yum has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Yum has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Yum is part of the Zacks Retail - Restaurants industry. Over the past month, Cheesecake Factory (CAKE Quick QuoteCAKE - Free Report) , a stock from the same industry, has gained 3.6%. The company reported its results for the quarter ended September 2024 more than a month ago.

Cheesecake Factory reported revenues of $865.47 million in the last reported quarter, representing a year-over-year change of +4.3%. EPS of $0.58 for the same period compares with $0.39 a year ago.

Cheesecake Factory is expected to post earnings of $0.91 per share for the current quarter, representing a year-over-year change of +13.8%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.2%.

Cheesecake Factory has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.