YUM BRANDS

(YUM)
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118.16 USD   +0.38%
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Yum Brands : beats expectations on KFC growth, Taco Bell weighs

05/01/2019 | 11:35am EDT
A Kentucky Fried Chicken (KFC) bucket of fried chicken is seen in this picture illustration

(Reuters) - Yum Brands Inc reported quarterly earnings and same-store sales above Wall Street estimates on Wednesday, as KFC recorded its best growth in three years, but weaker-than-expected growth at Taco Bell weighed on the company's shares.

Taco Bell recorded slowest growth in same-store sales in three quarters and missed analysts' expectations, as the restaurant chain competes for customers in a crowded fast-food market.

"They (offer) cheap, inexpensive food and the demand is still there. But it is not a big point of differentiation. You could go to a (convenience) store and get the same thing," said Tim Powell, a restaurant analyst at Chicago-based Q1 Consulting.

The Mexican-inspired chain has been a major growth driver for Yum Brands in the past two quarters, riding on the popularity of its value meals.

The restaurant chain has also expanded its delivery in the United States, making the most of Yum Brands' investments in GrubHub Inc.

But Taco Bell's same-store sales rose 4 percent in the latest quarter, falling short of the 4.47 percent estimated by analysts, according to IBES estimates from Refinitiv.

Edward Jones analyst Brian Yarbrough said expectations for growth in Taco Bell were high going into the quarter and the slight miss in same-store sales could be pulling down Yum Brands shares.

Same-store sales at Pizza Hut also fell short of expectations in the face of intense competition from local pizzerias and chains like Domino's Pizza Inc.

The highlight of the quarter was KFC, which reported a better-than-expected 5 percent rise in sales at established restaurants, boosted by growth in its international markets, including Indonesia and Japan.

Yum has been aggressively expanding its KFC restaurants, opening 372 new restaurants in 46 countries in the first quarter.

"Operational enhancements, such as a new menu board design and delivery through GrubHub each positively contributed to first-quarter sales," Chief Executive Officer Greg Creed said on a post-earnings call.

Excluding one-time items, Yum earned 82 cents per share, 1 cent above the average estimate.

Yum's net income fell about 40 percent to $262 million (£200 million) in the three months ended March 31, partly due to its investments in food delivery service GrubHub.

The company's shares fell as much as 3.6 percent on Wednesday, their worst day so far this year.

(Reporting by Nivedita Balu and Aishwarya Venugopal in Bengaluru; Editing by Anil D'Silva)

By Nivedita Balu


© Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
MITSUBISHI CORPORATION 2.79% 4274 Delayed Quote.17.03%
YUM BRANDS 0.38% 118.16 Delayed Quote.-14.91%
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Financials (USD)
Sales 2022 6 755 M - -
Net income 2022 1 331 M - -
Net Debt 2022 11 455 M - -
P/E ratio 2022 25,7x
Yield 2022 1,96%
Capitalization 33 622 M 33 622 M -
EV / Sales 2022 6,67x
EV / Sales 2023 6,33x
Nbr of Employees 36 000
Free-Float 99,9%
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Mean consensus OUTPERFORM
Number of Analysts 28
Last Close Price 118,16 $
Average target price 134,19 $
Spread / Average Target 13,6%
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Managers and Directors
David W. Gibbs Chief Executive Officer & Director
Chris Turner Chief Financial Officer
Brian C. Cornell Non-Executive Chairman
Clay Johnson Chief Technology & Digital Officer
Brian Cahoe Chief Development Officer
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