Yum! Brands (NYSE:YUM) Posts Earnings Results, Beats Expectations By $0.04 EPS

Yum! Brands (NYSE:YUM) announced its quarterly earnings results on Thursday. The restaurant operator reported $1.62 EPS for the quarter, topping analysts’ consensus estimates of $1.58 by $0.04, FiscalAI reports. Yum! Brands had a net margin of 20.48% and a negative return on equity of 23.51%. The firm had revenue of $2.17 billion during the quarter, compared to analyst estimates of $2.18 billion. During the same period in the previous year, the business posted $1.44 earnings per share. The business’s revenue for the quarter was up 12.2% on a year-over-year basis.

Here are the key takeaways from Yum! Brands’ conference call:

• Q2 results were solid excluding Pizza Hut: system sales grew 7%, units increased 6%, same-store sales rose 4%, and core operating profit grew 8%. Digital sales approached $9 billion, reaching 61% of system sales.
• KFC delivered 6% system sales growth, including 7% unit growth, and is on track for its best development year ever. Management is targeting stronger long-term same-store sales through global menu innovation, refreshed branding, loyalty expansion, and improved restaurant economics.
• Taco Bell U.S. same-store sales were down 2% quarter-to-date through July 27 following an industry-wide food-safety issue, and third-quarter equity restaurant margins are expected to decline to 19%–21%. Management said trends have improved steadily and expects the impact to be temporary.
• Pizza Hut’s sale for $2.7 billion is expected to close in August, allowing Yum! to focus on KFC, Taco Bell, and Habit. After paying down part of its revolver, management expects to allocate most remaining proceeds toward share repurchases, subject to market conditions.
• Yum! is expanding its Byte technology platform, loyalty programs, and AI capabilities to improve personalization, operating efficiency, and franchisee economics. Taco Bell’s digital mix reached 47%, while Voice AI was deployed in more than 900 Taco Bell restaurants.

Yum! Brands Trading Up 3.4%

YUM stock traded up $5.12 during midday trading on Thursday, reaching $157.04. 3,298,511 shares of the company’s stock traded hands, compared to its average volume of 2,085,115. Yum! Brands has a 52-week low of $137.33 and a 52-week high of $170.14. The stock has a market cap of $43.28 billion, a P/E ratio of 25.33, a PEG ratio of 1.89 and a beta of 0.56. The stock’s 50-day moving average is $153.93 and its 200 day moving average is $156.73.

Yum! Brands Announces Dividend

The firm also recently announced a quarterly dividend, which was paid on Friday, June 12th. Investors of record on Wednesday, May 27th were given a dividend of $0.75 per share. This represents a $3.00 annualized dividend and a yield of 1.9%. The ex-dividend date was Wednesday, May 27th. Yum! Brands’s payout ratio is 48.39%.

Yum! Brands announced that its Board of Directors has approved a share buyback plan on Tuesday, June 16th that allows the company to buyback $4.00 billion in shares. This buyback authorization allows the restaurant operator to purchase up to 9.4% of its shares through open market purchases. Shares buyback plans are typically an indication that the company’s management believes its shares are undervalued.

Wall Street Analyst Weigh In

Several brokerages recently issued reports on YUM. Citigroup raised their target price on shares of Yum! Brands from $175.00 to $178.00 and gave the stock a “neutral” rating in a report on Sunday, July 12th. Weiss Ratings lowered shares of Yum! Brands from a “buy (b)” rating to a “buy (b-)” rating in a research note on Tuesday. Deutsche Bank Aktiengesellschaft set a $177.00 price target on Yum! Brands in a report on Thursday, April 30th. Royal Bank Of Canada restated a “sector perform” rating and issued a $165.00 price target on shares of Yum! Brands in a research note on Monday, April 20th. Finally, UBS Group reiterated a “buy” rating on shares of Yum! Brands in a research report on Thursday, June 18th. Eleven equities research analysts have rated the stock with a Buy rating and seven have given a Hold rating to the stock. According to data from MarketBeat.com, the stock presently has a consensus rating of “Moderate Buy” and a consensus price target of $174.81.

Key Stories Impacting Yum! Brands

Here are the key news stories impacting Yum! Brands this week:

• Positive Sentiment: Adjusted earnings exceeded expectations. Yum reported second-quarter adjusted EPS of $1.62, ahead of the roughly $1.58-$1.59 consensus and up from $1.44 a year earlier. Revenue increased 12.2% year over year to $2.17 billion, broadly in line with estimates. Yum! Brands Reports Second-Quarter Results
• Positive Sentiment: Taco Bell delivered strong pre-outbreak performance. Robust sales at Taco Bell, along with global expansion and restaurant-level margin performance, helped offset weaker results at Pizza Hut and drove the quarterly profit beat. Yum! Brands Q2 Earnings Beat Estimates on Taco Bell Strength
• Positive Sentiment: Management says Taco Bell traffic is recovering. The company has removed affected lettuce, emphasized food-safety actions, and is using discounts and new menu items to rebuild customer trust. Taco Bell same-store sales were down 2% quarter-to-date through July 27, but reports indicate the sharpest decline occurred shortly after the outbreak and demand has begun to improve. Taco Bell Parent Company Says Sales Already Recovering
• Neutral Sentiment: The outlook remains dependent on the outbreak’s duration. The reported quarter ended June 30 and largely predates the food-safety crisis, limiting its usefulness as a guide to current Taco Bell sales. Investors will watch for additional costs, brand damage, and the pace of traffic normalization. Cyclospora Outbreak Clouds Strong Earnings
• Negative Sentiment: Pizza Hut remains a weak spot, and the company’s revenue was slightly below some analyst estimates. The outbreak also creates near-term uncertainty for Yum’s most important growth brand despite the early recovery signals.

Insider Buying and Selling at Yum! Brands

In other news, CEO Scott Mezvinsky sold 277 shares of the business’s stock in a transaction on Friday, May 1st. The shares were sold at an average price of $160.48, for a total transaction of $44,452.96. Following the completion of the sale, the chief executive officer owned 483 shares of the company’s stock, valued at $77,511.84. The trade was a 36.45% decrease in their position. The sale was disclosed in a legal filing with the SEC, which is available at this link. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, COO Tracy L. Skeans sold 1,837 shares of the business’s stock in a transaction on Friday, May 15th. The shares were sold at an average price of $152.00, for a total transaction of $279,224.00. Following the sale, the chief operating officer directly owned 3,497 shares of the company’s stock, valued at approximately $531,544. The trade was a 34.44% decrease in their position. Additional details regarding this sale are available in the official SEC disclosure. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Over the last ninety days, insiders have sold 12,423 shares of company stock worth $1,953,721. Insiders own 0.14% of the company’s stock.

Institutional Inflows and Outflows

Several institutional investors have recently made changes to their positions in YUM. Wiser Advisor Group LLC purchased a new position in shares of Yum! Brands during the 3rd quarter valued at about $28,000. Jessup Wealth Management Inc bought a new position in shares of Yum! Brands during the 4th quarter valued at approximately $30,000. Safe Harbor Fiduciary LLC purchased a new stake in Yum! Brands in the 4th quarter worth approximately $31,000. Garton & Associates Financial Advisors LLC purchased a new stake in Yum! Brands in the 4th quarter worth approximately $38,000. Finally, Sunbelt Securities Inc. raised its stake in Yum! Brands by 49.5% during the 3rd quarter. Sunbelt Securities Inc. now owns 290 shares of the restaurant operator’s stock worth $44,000 after acquiring an additional 96 shares during the period. Institutional investors own 82.37% of the company’s stock.

About Yum! Brands

Yum! Brands, Inc (NYSE: YUM) is a global quick-service restaurant company that develops, operates and franchises a portfolio of well-known restaurant brands. The company’s principal brands are KFC, Pizza Hut and Taco Bell, each focused on distinct product categories—KFC on fried chicken and related menu items, Pizza Hut on pizza and complementary offerings, and Taco Bell on Mexican-inspired quick-service food. Yum! is headquartered in Louisville, Kentucky and was formed as Tricon Global Restaurants in 1997 when PepsiCo spun off its restaurant businesses, later adopting the Yum! Brands name.

The company’s operating model centers on brand development, system growth and franchising; a large portion of its restaurants are operated by independent franchisees, and Yum! generates revenue through franchise royalties and fees in addition to sales from company-operated locations.