YUM! Brands, Inc. YUM has delivered better-than-expected results in the second quarter of 2019.
Its adjusted earnings of 93 cents per share surpassed the Zacks Consensus Estimate of 87 cents by 6.9%. Also, the bottom line grew 15% on a year-over-year basis. The shift to refranchising substantially helped the company’s operating margin and in turn aided earnings.
Its total revenues of $1,310 million were down 4% year over year but surpassed the consensus estimate of $1,275 million. This downside was caused by a decline in sales, owing to the company’s continued refranchising initiatives.
Worldwide system sales, excluding foreign currency translation, grew 10%, with each of KFC, Pizza Hut and Taco Bell growing 10%. Also, the company opened 312 net new units, reflecting 7% unit growth.
Notably, shares of YUM! Brands have gained 39.6% in the past year, slightly outperforming the industry’s rally of 37.4%.
YUM! Brands reports results under three segments — KFC, Pizza Hut and Taco Bell.
Revenues from KFC totaled $584 million, down 10% on a year-over-year basis. Comps at this division rose 6%, higher than the year-ago quarter’s comps growth of 2% and the first quarter’s gain of 5%.
This segment’s operating margin was up 860 basis points (bps) to 44.7% year over year, owing to refranchising and same-store sales growth. Unit growth also facilitated margins.
In the quarter under review, the segment opened 331 gross new restaurants in 54 countries.
At Pizza Hut, revenues amounted to $246 million, up 6% on a year-over-year basis. Comps rose 2% against the year-ago quarter’s decline of 1%. Comps were flat in the first quarter of 2019.
The segment’s operating margin was up 410 bps year over year to 38.7%, driven by refranchising, comps growth, and lower franchise and property expenses due to a decline in advertising spend associated with the U.S. Transformation Agreement.
Pizza Hut Division opened 221 gross new restaurants in 42 countries in the second quarter.
Taco Bell’s revenues were $480 million, down 1% from the year-ago quarter. Comps rose 7% in the reported quarter, which compared favorably with the year-ago quarter’s growth of 2%. In first-quarter 2019, the segment’s comps gained 4%.
This segment’s operating margin was up 240 basis points to 33.2% year over year.
Taco Bell recorded 55 gross new restaurants openings in 12 countries during the quarter.
Yum! Brands, Inc. Price, Consensus and EPS Surprise
Yum! Brands, Inc. price-consensus-eps-surprise-chart | Yum! Brands, Inc. Quote
Other Financial Details
Cash and cash equivalents as of Jun 30, 2019, totaled $252 million compared with $292 million as of Dec 31, 2018. Long-term debt at the end of the reported quarter was $9,869 million compared with $9,751 million at the end of 2018. During the quarter, the company repurchased 1.9 million shares for $104 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.
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