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YUM! Brands (YUM) Q2 Earnings & Revenues Beat Estimates

Zacks Equity Research

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%.

 

 

Segmental Performance

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 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.

Darden DRI reported fourth-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate, whereas revenues lagged the same. Adjusted earnings of $1.76 per share beat the Zacks Consensus Estimate of $1.73. Moreover, the bottom line grew 26.6% year over year on higher revenues.

Domino’s DPZ reported mixed second-quarter 2019 financial numbers, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Its adjusted earnings were $2.19 per share, which outpaced the Zacks Consensus Estimate of $2.00. The metric also grew 19% 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.

Chipotle CMG reported better-than-expected results in the second quarter of 2019. Its adjusted earnings of $3.99 per share surpassed the Zacks Consensus Estimate of $3.69 by 8.1%. The bottom line also grew 39% from the year-ago quarter, backed by rise in revenues and strong operating margins.

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