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Why Is Yum China (YUMC) Up 5.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Yum China Holdings (YUMC - Free Report) . Shares have added about 5.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Yum China due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Yum China Q4 Earnings And Revenues Lag Estimates
Yum China reported dismal fourth-quarter 2021 results, with earnings and revenues missing the Zacks Consensus Estimate. Although the top line increased from the prior-year quarter’s levels, the bottom line declined on a year-over-year basis.
During the quarter, the company’s operations were affected by the resurgence of Covid-19 cases. As multiple waves of the Delta variant outbreaks persisted throughout the fourth quarter, stringent public health measures (mass testing and regional lockdowns) were implemented to counter the same. Reduced traveling, fewer social activities and softened consumption demand negatively impacted the company’s performance in the fourth quarter.
Earnings & Revenue Discussion
During fourth-quarter 2021, the company reported adjusted diluted earnings of 3 cents. The figure missed the Zacks Consensus Estimate of 17 cents by 82.4%. The bottom line declined 91.4% from 35 cents reported in the year-ago quarter.
Quarterly revenues of $2,291 million missed the consensus mark of $2,396 million by 4.4%. However, the top line inched up 1.4% on a year-over-year basis. Excluding foreign currency translation, the top line declined 2% year over year.
Total system sales in the reported quarter decreased 3% year over year. System sales at KFC and Pizza Hut declined by 3% and 2%, respectively. Meanwhile, same-store sales dropped 11% year over year primarily due to a fall of 12% at KFC and 8% at Pizza Hut.
Operating Highlights
During fourth-quarter 2021, total costs and expenses totaled $1,658 million, down 20.3% from $2,079 million reported in the prior-year quarter.
Restaurant margin in the quarter under review was 7.5%, down 760 basis points from the year-ago quarter’s levels. The downside was primarily caused by sales deleveraging, stepped-up promotions, cost inflation and high delivery costs associated with a rise in delivery volume.
During the quarter, adjusted operating profit totaled $16 million, down 91% from the year-ago quarter’s levels. Adjusted net income amounted to $11 million compared with $153 million reported in the prior-year quarter.
Balance Sheet
As of Dec 31, 2021, cash and cash equivalents came in at $1,136 million compared with $1,158 million as of Dec 31, 2020. Inventories during the fourth quarter came in at $432 million compared with $398 million in the previous quarter.
During the fourth quarter, the company repurchased $41.4 million worth of stock at an average price of $55.66. As of Dec 31, the company had approximately $617 million available for the buyback program.
The company declared a quarterly cash dividend of 12 cents per common share. The dividend will be payable on Mar 29, 2022, to shareholders of record as of Mar 8, 2022.
Unit Development and Other Updates
During fourth-quarter 2021, Yum China opened 563 gross new restaurants owing to the development of the KFC and Pizza Hut brands. As of Dec 31, the company’s total restaurant count stood at 11,788, up 1,282 stores year over year.
During the quarter under review, the company’s delivery contributed nearly 35% of KFC and Pizza Hut's company sales, up nearly six percentage points from the prior-year quarter’s levels.
Digital orders during the quarter contributed 88% to KFC and Pizza Hut's company sales compared with 83% reported in the previous-year quarter. Loyalty programs of KFC and Pizza Hut led to year-over-year growth. During the fourth quarter, KFC and Pizza Hut loyalty programs increased to more than 360 million members.
2021 Highlights
Total revenues in 2021 amounted to $9,853 million compared with $8,263 million in 2020. Adjusted Net Income in 2021 totaled $525 million compared with $615 million in 2020. In 2021, diluted earnings per share (EPS) came in at $1.24 per share compared with $1.58 reported in the previous year.
2022 Outlook
In 2022, Yum China expects to open approximately 1,000 to 1,200 new stores. The company anticipates solid expansion related to KFC and Pizza Hut stores. Capital expenditures in 2022 are anticipated in the range of $800-$1000 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -12.17% due to these changes.
VGM Scores
Currently, Yum China has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Yum China has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Why Is Yum China (YUMC) Up 5.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Yum China Holdings (YUMC - Free Report) . Shares have added about 5.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Yum China due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Yum China Q4 Earnings And Revenues Lag Estimates
Yum China reported dismal fourth-quarter 2021 results, with earnings and revenues missing the Zacks Consensus Estimate. Although the top line increased from the prior-year quarter’s levels, the bottom line declined on a year-over-year basis.
During the quarter, the company’s operations were affected by the resurgence of Covid-19 cases. As multiple waves of the Delta variant outbreaks persisted throughout the fourth quarter, stringent public health measures (mass testing and regional lockdowns) were implemented to counter the same. Reduced traveling, fewer social activities and softened consumption demand negatively impacted the company’s performance in the fourth quarter.
Earnings & Revenue Discussion
During fourth-quarter 2021, the company reported adjusted diluted earnings of 3 cents. The figure missed the Zacks Consensus Estimate of 17 cents by 82.4%. The bottom line declined 91.4% from 35 cents reported in the year-ago quarter.
Quarterly revenues of $2,291 million missed the consensus mark of $2,396 million by 4.4%. However, the top line inched up 1.4% on a year-over-year basis. Excluding foreign currency translation, the top line declined 2% year over year.
Total system sales in the reported quarter decreased 3% year over year. System sales at KFC and Pizza Hut declined by 3% and 2%, respectively. Meanwhile, same-store sales dropped 11% year over year primarily due to a fall of 12% at KFC and 8% at Pizza Hut.
Operating Highlights
During fourth-quarter 2021, total costs and expenses totaled $1,658 million, down 20.3% from $2,079 million reported in the prior-year quarter.
Restaurant margin in the quarter under review was 7.5%, down 760 basis points from the year-ago quarter’s levels. The downside was primarily caused by sales deleveraging, stepped-up promotions, cost inflation and high delivery costs associated with a rise in delivery volume.
During the quarter, adjusted operating profit totaled $16 million, down 91% from the year-ago quarter’s levels. Adjusted net income amounted to $11 million compared with $153 million reported in the prior-year quarter.
Balance Sheet
As of Dec 31, 2021, cash and cash equivalents came in at $1,136 million compared with $1,158 million as of Dec 31, 2020. Inventories during the fourth quarter came in at $432 million compared with $398 million in the previous quarter.
During the fourth quarter, the company repurchased $41.4 million worth of stock at an average price of $55.66. As of Dec 31, the company had approximately $617 million available for the buyback program.
The company declared a quarterly cash dividend of 12 cents per common share. The dividend will be payable on Mar 29, 2022, to shareholders of record as of Mar 8, 2022.
Unit Development and Other Updates
During fourth-quarter 2021, Yum China opened 563 gross new restaurants owing to the development of the KFC and Pizza Hut brands. As of Dec 31, the company’s total restaurant count stood at 11,788, up 1,282 stores year over year.
During the quarter under review, the company’s delivery contributed nearly 35% of KFC and Pizza Hut's company sales, up nearly six percentage points from the prior-year quarter’s levels.
Digital orders during the quarter contributed 88% to KFC and Pizza Hut's company sales compared with 83% reported in the previous-year quarter. Loyalty programs of KFC and Pizza Hut led to year-over-year growth. During the fourth quarter, KFC and Pizza Hut loyalty programs increased to more than 360 million members.
2021 Highlights
Total revenues in 2021 amounted to $9,853 million compared with $8,263 million in 2020. Adjusted Net Income in 2021 totaled $525 million compared with $615 million in 2020. In 2021, diluted earnings per share (EPS) came in at $1.24 per share compared with $1.58 reported in the previous year.
2022 Outlook
In 2022, Yum China expects to open approximately 1,000 to 1,200 new stores. The company anticipates solid expansion related to KFC and Pizza Hut stores. Capital expenditures in 2022 are anticipated in the range of $800-$1000 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -12.17% due to these changes.
VGM Scores
Currently, Yum China has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Yum China has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.