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Yum! Brands (YUM) Q3 Earnings Top Estimates, Sales Disappoint

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Yum! Brands, Inc. (YUM - Free Report) has delivered better-than-expected results for the eighth straight quarter when it reported third-quarter 2018 numbers.

Adjusted earnings of $1.04 per share surpassed the Zacks Consensus Estimate of 83 cents. Further, the bottom line increased 52.9% on a year-over-year basis. The shift to refranchising substantially bolstered the company’s operating margin and earnings per share.

Total revenues of $1,391 million were down 3.1% year over year but exceeded the consensus estimate of $1,380 million. The downside was mainly due to decrease in sales as an impact of the company’s continued refranchising initiatives.

In the third quarter, the company opened 410 net new units, reflecting 4% net new unit growth. Moreover, Yum! Brands refranchised 134 restaurants, including 57 KFC, 31 Pizza Hut and 46 Taco Bell units for pre-tax proceeds of $193 million.

Notably, shares of Yum! Brands have gained 16.1% in the past year, outperforming the industry’s rally of 7.9%.

Segmental Performance

Yum! Brands reports under three segments — KFC, Pizza Hut and Taco Bell.

Revenues from KFC totaled $649 million, down 18.3% on a year-over-year basis. Comps at this division increased 3% compared with the year-ago quarter’s rise of 4% and the last reported quarter’s increase of 2%.

This segment’s operating margin was up 5.4% to 38.2% year over year, owing to refranchising and same-store sales growth.

At Pizza Hut, revenues amounted to $229 million, up 12% on a year-over-year basis. Comps were down 1% compared with the year-ago quarter’s increase of 1% and last reported quarter’s decline of 1%.

The segment’s operating margin was down 1.8% year over year to 38.7%.

Taco Bell’s revenues were $513 million, up 16% from the year-ago quarter. Comps rose 5%, which compared favorably with the year-ago quarter’s growth of 3%. In second-quarter 2018, the segment’s comps gained 2%.

Segment operating margin was down 180 basis points to 31.5% year over year.

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


Other Financial details

Cash and cash equivalents as of Sep 30, 2018, totaled $198 million compared with $1,522 million as of Dec 31, 2017. Long-term debt at the end of the reported quarter was $9,405 million compared with $9,429 million at the end of 2017. During the quarter under review, the company repurchased 6.3 million shares for $527 million.

Zacks Rank & Peer Releases

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

McDonald's (MCD - Free Report) reported impressive third-quarter 2018 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings per share of $2.10 surpassed the consensus mark of $1.98 by 6.1% and increased 19% from the year-ago quarter (22% in constant currencies). The upside reflects stronger operating performance.

Domino's (DPZ - Free Report) reported mixed quarterly numbers for third-quarter 2018, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $1.95 per share outpaced the consensus mark of $1.73 and increased 53.5% on a year-over-year basis. The bottom-line improvement was driven by higher net income and lower diluted share count as a result of share repurchases.

Restaurant Brands (QSR - Free Report) reported lower-than-expected results in third-quarter 2018. Adjusted earnings of 63 cents per share missed the consensus mark by a couple of cents. However, the reported figure increased 8.6% from the year-ago quarter. This uptick can be primarily attributable to consistent improvement in the company’s top line along with the recovery of preferred shares in December 2017.

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