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Yum China (YUMC) Q1 Earnings Surpass Estimates, Fall Y/Y
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Yum China Holdings, Inc. (YUMC - Free Report) reported first-quarter 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate by 164% and 53.2%, respectively. The bottom line surpassed the consensus estimate for the 10th straight quarter, whereas revenues topped expectations for the second straight quarter.
Following the announcement, the company’s shares remained unchanged in after-hours trading on Apr 29. However, shares of Yum China have gained 4.3% in the past six months against the industry’s 9% decline.
Adjusted earnings of 16 cents compared favorably with the Zacks Consensus Estimate of a loss of 25 cents. However, the reported figure declined 72.9% from the year-ago quarter. Excluding the impact of its investment in Meituan Dianping in 2020 and 2019, earnings declined 68% year over year.
Yum China Holdings Inc. Price, Consensus and EPS Surprise
The company’s total revenues of $1,754 million beat the consensus mark of $1,145 million in the first quarter of 2020. However, the metric deteriorated 23.9% year over year. Excluding foreign currency translation, the top line fell 21% on a year-over-year basis.
Total system sales in the reported quarter declined 20% (excluding foreign currency translation) from the year-ago period owing to system sales fall of 15% at KFC and 38% at Pizza Hut. Also, same-store sales declined 15% year over year, primarily owing to a fall of 11% at KFC and 31% at Pizza Hut.
Operating Highlights
In the first quarter, total costs and expenses contracted 17.2% year over year to $1,657 million, compared with $2,001 million in the year-ago quarter. This improvement was backed by a 13.2% decline in general and administrative expenses, 22.4% drop in food and paper costs, 15.5% decline in payroll and employee-benefit costs along with an 18.8% drop in company restaurant expenses.
Restaurant margin in the quarter under review was 10.7%, reflecting a 780-basis point drop from the year-ago period. The decline was primarily led by dismal same-store performance, temporary store closures due to coronavirus along with wage and commodity inflation. However, this was partially offset by the relief provided by landlords and government agencies.
Adjusted operating profit totaled $98 million, down 67.7% from the year-ago quarter. Adjusted net income declined to $63 million from $230 million in the prior-year period.
Balance Sheet
Cash and cash equivalents as of Mar 31, 2020, summed $1,048 million compared with $1,046 million as on Dec 31, 2019. Inventories in the first quarter were $317 million compared with $380 million at 2019-end.
During the first quarter, Yum China repurchased approximately 0.16 million shares of common stock for $7.1 million. It also returned $52 million to shareholders in the form of dividends and share repurchases.
Unit Development and Other Details
In the first quarter, Yum China opened 179 new restaurants and remodeled 31. The company’s delivery contributed 35% to sales in the first quarter, up 16 percentage points from the prior-year period.
Digital orders in the first quarter accounted for 84% of sales at KFC (up 29 percentage points year over year) and 65% of sales in Pizza Hut (36).
As of Mar 31, 2020, both KFC and Pizza Hut loyalty programs constituted more than 250 million members. In the first quarter, KFC member sales accounted for nearly 62% of KFC's system sales, while Pizza Hut member sales contributed approximately 44% to Pizza Hut's system sales.
2020 Outlook
Yum China expects the store count in the range of 800-850 in 2020. Capital expenditure is projected between $500 million and $550 million.
The company has been undertaking numerous measures to protect employees, customers and business partners during the pandemic. However it has stated that coronavirus is expected to have a material adverse impact on its operating and financial results for 2020.
Some better-ranked stocks in the Retail-Wholesale sector are Sprouts Farmers Market, Inc. (SFM - Free Report) , Nautilus, Inc. and SpartanNash Company (SPTN - Free Report) , each sporting a Zacks Rank #1.
Sprouts Farmers has three-five year earnings per share growth rate of 3.7%
Nautilus and SpartanNash 2020 earnings are expected to rise 82.4% and 26.4%, respectively.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Yum China (YUMC) Q1 Earnings Surpass Estimates, Fall Y/Y
Yum China Holdings, Inc. (YUMC - Free Report) reported first-quarter 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate by 164% and 53.2%, respectively. The bottom line surpassed the consensus estimate for the 10th straight quarter, whereas revenues topped expectations for the second straight quarter.
Following the announcement, the company’s shares remained unchanged in after-hours trading on Apr 29. However, shares of Yum China have gained 4.3% in the past six months against the industry’s 9% decline.
Adjusted earnings of 16 cents compared favorably with the Zacks Consensus Estimate of a loss of 25 cents. However, the reported figure declined 72.9% from the year-ago quarter. Excluding the impact of its investment in Meituan Dianping in 2020 and 2019, earnings declined 68% year over year.
Yum China Holdings Inc. Price, Consensus and EPS Surprise
Yum China Holdings Inc. price-consensus-eps-surprise-chart | Yum China Holdings Inc. Quote
Detailed Revenue Discussion
The company’s total revenues of $1,754 million beat the consensus mark of $1,145 million in the first quarter of 2020. However, the metric deteriorated 23.9% year over year. Excluding foreign currency translation, the top line fell 21% on a year-over-year basis.
Total system sales in the reported quarter declined 20% (excluding foreign currency translation) from the year-ago period owing to system sales fall of 15% at KFC and 38% at Pizza Hut. Also, same-store sales declined 15% year over year, primarily owing to a fall of 11% at KFC and 31% at Pizza Hut.
Operating Highlights
In the first quarter, total costs and expenses contracted 17.2% year over year to $1,657 million, compared with $2,001 million in the year-ago quarter. This improvement was backed by a 13.2% decline in general and administrative expenses, 22.4% drop in food and paper costs, 15.5% decline in payroll and employee-benefit costs along with an 18.8% drop in company restaurant expenses.
Restaurant margin in the quarter under review was 10.7%, reflecting a 780-basis point drop from the year-ago period. The decline was primarily led by dismal same-store performance, temporary store closures due to coronavirus along with wage and commodity inflation. However, this was partially offset by the relief provided by landlords and government agencies.
Adjusted operating profit totaled $98 million, down 67.7% from the year-ago quarter. Adjusted net income declined to $63 million from $230 million in the prior-year period.
Balance Sheet
Cash and cash equivalents as of Mar 31, 2020, summed $1,048 million compared with $1,046 million as on Dec 31, 2019. Inventories in the first quarter were $317 million compared with $380 million at 2019-end.
During the first quarter, Yum China repurchased approximately 0.16 million shares of common stock for $7.1 million. It also returned $52 million to shareholders in the form of dividends and share repurchases.
Unit Development and Other Details
In the first quarter, Yum China opened 179 new restaurants and remodeled 31. The company’s delivery contributed 35% to sales in the first quarter, up 16 percentage points from the prior-year period.
Digital orders in the first quarter accounted for 84% of sales at KFC (up 29 percentage points year over year) and 65% of sales in Pizza Hut (36).
As of Mar 31, 2020, both KFC and Pizza Hut loyalty programs constituted more than 250 million members. In the first quarter, KFC member sales accounted for nearly 62% of KFC's system sales, while Pizza Hut member sales contributed approximately 44% to Pizza Hut's system sales.
2020 Outlook
Yum China expects the store count in the range of 800-850 in 2020. Capital expenditure is projected between $500 million and $550 million.
The company has been undertaking numerous measures to protect employees, customers and business partners during the pandemic. However it has stated that coronavirus is expected to have a material adverse impact on its operating and financial results for 2020.
Zacks Rank & Key Picks
Yum China currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Retail-Wholesale sector are Sprouts Farmers Market, Inc. (SFM - Free Report) , Nautilus, Inc. and SpartanNash Company (SPTN - Free Report) , each sporting a Zacks Rank #1.
Sprouts Farmers has three-five year earnings per share growth rate of 3.7%
Nautilus and SpartanNash 2020 earnings are expected to rise 82.4% and 26.4%, respectively.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>