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Yum! Brands (YUM) Q1 Earnings & Revenues Beat Estimates

Zacks Equity Research

Yum! Brands, Inc. YUM has delivered better-than-expected results in the first quarter of 2019.

Adjusted earnings of 82 cents per share surpassed the Zacks Consensus Estimate of 80 cents by 2.5%. However, the bottom line decreased 8% on a year-over-year basis. While the shift to refranchising substantially helped the company’s operating margin, pre-tax investment expenses negatively impacted earnings in the quarter under review.

Total revenues of $1,254 million were down 9% year over year butsurpassed the consensus estimate of $1,247 million. This downside was caused by decreased sales, owing to the company’s continued refranchising initiatives.

Worldwide system sales, excluding foreign currency translation, grew 8%, with Taco Bell at 7%, KFC at 9% and Pizza Hut at 7% in the quarter under review. Also, the company opened 310 net new units, reflecting 7% unit growth.

Notably, shares of Yum! Brands have gained 30.1% in the past year, outperforming the industry’s rally of 13.2%.


 

Segmental Performance

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

Revenues from KFC totaled $566 million, down 14% on a year-over-year basis. Comps at this division increased 5%, higher than the year-ago quarter’s comps growth of 2% and the fourth quarter’s increase of 3%.

This segment’s operating margin was up 810 basis points (bps) to 41.7% year over year, owing to refranchising and same-store sales growth, partially offset by the negative impact of foreign currency translation.

At Pizza Hut, revenues amounted to $243 million, down 3% on a year-over-year basis. Comps remained flat compared with the year-ago quarter’s increase of 1%.Comps were also flat in the fourth quarter of 2018.

The segment’s operating margin was up 510 bps year over year to 40.1%,driven by refranchising, and lower franchise and property expenses due to lower advertising spend associated with the U.S. Transformation Agreement.

Taco Bell’s revenues were $445 million, down 4% from the year-ago quarter. Comps rose 4% in the reported quarter, which compared favorably with the year-ago quarter’s growth of 1%. In fourth-quarter 2018, the segment’s comps gained 6%.

This segment’s operating margin was up 250 basis points to 31% year over year.

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

 

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

Other Financial Details

Cash and cash equivalents as of Mar 31, 2019, totaled $278 million compared with $292 million as of Dec 31, 2018. Long-term debt at the end of the reported quarter was $9,736 million compared with $9,751 million at the end of 2018. During the quarter, the company repurchased 1.1 million shares for $106 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.

Darden DRI reported third-quarter fiscal 2019 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of $1.80 per share beat the Zacks Consensus Estimate of $1.75. Moreover, the bottom line increased 5.3% year over year on the back of higher revenues.

Chipotle CMG reported better-than-expected results in the first quarter of 2019. Adjusted earnings of $3.40 per share surpassed the Zacks Consensus Estimate of $3.01 by 13%. The bottom line also grew 59.6% from the year-ago quarter, backed by increased revenues and lower food costs.

Domino’s DPZ reported mixed first-quarter 2019 financial numbers, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $2.20 per share surpassed the Zacks Consensus Estimate of $2.07 and increased 10% 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.

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