Yum Brand's Third Quarter Results

Yum Brands is one of the largest fast food operators in the world and operates over 41,000 restaurant in over 125 countries. The company operates Taco Bell, KFC, Pizza Hut, and WingStreet globally that produces $13 billion in sales in 2014. Yum Brand is the largest U.S. fast food operator in China. This has provided Yum with above average growth over the last decade. However, now that China is having economic woes, it is taking its toll on Yum.

Yum Brands on Tuesday reported earnings of $1.0/share on revenues of $3.46. This was below Wall Street analyst estimates of $1.6/share in earnings on revenues of $3.68/share.
However, the company did report an increase in GAAP earning of 95 cents compared to 89 cents in the third quarter of last year. The company reported a 6% global sales and a 3.3% increase in restaurant margins. Yum restaurant margins increased to 18%, which resulted in operating profits increasing by 22% year over year.

I'm a little confused on why shares in Yum Brand tanked by over 18% for only missing analyst estimated.  Since the company report increases in profits and margins from its restaurants. China may be experiencing economic woes, which prevented Yum's China Division from reporting a 8% increase from the previous year. This increase was the result of a 7% increase in units and 2% increase in same store sales.

The company's KFC division saw a 6% increase in sales driven by a 3% increase unit growth and same store sales. Yum's Pizza Hut division saw a 2% increase in system sells and units.  It's Pizza Hut division saw a 1% same store sales, compared to the company's Taco Bell division. Yum's Taco Bell Division saw a 7% in system sales on 3% unit growth. The company's India division on the other hand saw a decline of 9% in system sales on a 10% increase in unit sales. Also Yum's India division saw same store sales decline by 18% during the third quarter.

What happening in China as forced Yum to cut its fourth quarter and full year guidance. In the short-term, shares in Yum Brand will probably fall more as the company struggles with whats happening in China. Yum Brands China operations will continue to be a drag on earnings and its stock price.
Published on Oct 10, 2015
By Cody Eustice
Cody is a freelance writer who has been writing financial articles for various sites for over a year now. He is a value investor looking for companies that sell for far less than their estimated business value.

Copyrighted 2016. Content published with author's permission.

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