In part due to its success in China, Yum CEO Greg Creed said in the company’ second quarter earnings report Wednesday that he expects the Yum’s core operating profit to jump 14% this year, up from a previously expected 12% gain. The restaurant operator reported $0.75 EPS for the quarter, topping the Thomson Reuters’ consensus estimate of $0.74 by $0.01. Analysts had a consensus revenue estimate of $2.66 billion.
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The stock is flat today after climbing 17% this year, while the S&P SPDR 500 exchange-traded fund (SPY) is up 5% and the iShares MSCI Emerging Market ETF (EEM) is up almost 10% year to date.
Yum Brands, the parent company of Taco Bell, KFC and Pizza Hut, said revenues remained flat at $2.62 billion. Brands was hurt by the strength of the USA dollar. Yum! Consumers may have “menu fatigue” with the $5 flavor menu at Pizza Hut, and the sluggish non-burger quick-service business may have an impact on both Taco Bell and KFC. System sales for the KFC division grew 6% with a 2% increase in same store sales. Yum!
“All in all, we continue to argue that the structure of Yum Brands – three large brands with little-to-no synergies (and arguable, dis-synergies) crammed together almost 20 years ago by a beverage company – is not ideal”, Nomura wrote. Brands (YUM) fell $0.21 during the day at $86.23, a drop of -0.24% over the previous days close.
Sales +2%, same-store sales -1%, unit growth +3%, operating profit -1%, restaurant margin -30 bps to 22.3%. Deutsche Bank AG reaffirmed a “hold” rating on shares of Yum Brands in a research note on Saturday, April 23rd.
RBC has a $94 price target on Yum shares. The company has an average rating of “Hold” and an average target price of $86.11. Nonetheless, 7 analysts are positive on the stocks future and they recommend a Strong Buy on the stock.
RBC Capital Markets, which names Yum Brands as a top pick representing an analyst’s “best idea in the sector”, believes the company’s stock has long-term value, but expects the second quarter to be “lackluster”.
“We look forward to establishing two powerful, independent, focused growth companies dedicated to building on our brand strengths and rewarding our shareholders”.
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Yum reaps more operating profit from China than any other division.
