Yum China (YUMC) Stock Up 16% in 3 Months: More Room to Run?
Despite inflation, Yum China Holdings, Inc. YUMC shares have done well in the past three months. In the same time frame, the stock has surged 15.7%, compared with the industry’s increase of 10.3%. The company is benefiting from unit expansion, menu innovation, robust loyalty program and digitalization.
The Zacks Rank #3 (Hold) company has an impressive long-term earnings growth rate of 11%. In the past 30 days, the Zacks Consensus Estimate for YUMC's 2022 earnings has been revised upward by 14.1%.
Let’s delve deeper.
Yum China focuses on relentless unit expansion to drive incremental sales. During the second and third quarters of 2022, Yum China opened 246 and 403 gross new restaurants, respectively, driven by the development of the KFC and Pizza Hut brands. As of Jun 30, the company's total restaurant count was 12,409.
Meanwhile, the company emphasizes on expanding its supply-chain network to support store and portfolio growth and enhance intelligent supply chain operations. During the second quarter of 2022, the company completed the construction of its two greenfield logistics centers in Chengdu.
Yum China also initiated the construction of its Jiading Supply Chain Management Center in Shanghai. The venue will serve as the company's supply-chain operations headquarter and support restaurants in eastern China.
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Moreover, the company stated the integration of digital technologies to support developments. It expects to complete the project in 2024. Nevertheless, the company has several other sites in the pipeline. It intends to open 45-50 logistics centers and consolidation centers over the next several years to support expansion and increase efficiency.
Another riveting growth potential of Yum China resides in its continual menu innovation to encourage top-line growth. KFC’s extraordinary performance is attributable to greater sales of menu offerings like crayfish burger, stuffed chicken wing and spicy chicken burger. Along with such innovations, the company also offers signature menus for Chinese New Year. Yum China is also serving coffee across its restaurants and expanding the dessert category.
Additionally, Yum China created a robust loyalty program with more than 400 million loyalty members cumulatively. Pizza Hut’s membership increased by 100 million members. In the third quarter, member sales accounted for nearly 60% of system sales.
Yum China holds a leadership position in the Chinese restaurant space when it comes to delivery, mobile order and pay, and loyalty membership. The company is increasingly shifting toward digital and content marketing to expand its customer base. It has adopted a high-grade delivery strategy that includes collaborating with aggregators to source traffic and fulfills orders by the company’s KFC riders.
Digital orders during third-quarter 2022 contributed 91% to the KFC and Pizza Hut brands’ company sales. During the quarter, the company’s delivery contributed nearly 38% to the KFC and Pizza Hut brands’ company sales, up 4% from the prior-year quarter’s levels.
Some better-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. WING, Chuy's Holdings, Inc. CHUY and Chipotle Mexican Grill, Inc. CMG.
Wingstop currently sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have increased 0.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.
Chuy’s Holdings currently carries a Zacks Rank #2 (Buy). CHUY has a trailing four-quarter earnings surprise of 18.6%, on average. Shares of CHUY have increased 8% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 8.6% and 11.7%, respectively, from the corresponding year-ago period’s levels.
Chipotle currently carries a Zacks Rank #2. CMG has a trailing four-quarter earnings surprise of 4.1%, on average. The stock has declined 1.1% in the past year.
The Zacks Consensus Estimate for Chipotle’s 2022 sales and EPS suggests growth of 15.1% and 31%, respectively, from the corresponding year-ago period’s levels.
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