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YUM! Brands (YUM) Q1 Earnings and Revenues Lag Estimates

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YUM! Brands, Inc. (YUM - Free Report) reported first-quarter 2022 results, wherein earnings and revenues missed the Zacks Consensus Estimate. The top line lagged the consensus mark after beating the same in the trailing 10 quarters.

The company's results in the quarter benefited from strong digital sales, robust unit development and a diversified global business model. During the quarter, the company reported digital sales of more than $6 billion, up 15% year over year.

David Gibbs, CEO of YUM! Brands, said "Our system sales grew 8% despite the difficult operating environment, a testament to the demand for our iconic brands and the unmatched operating capabilities of our world-class franchise partners. We set a Q1 development record, opening nearly 1,000 gross units. Momentum in our digital sales continued in the first quarter as a result of both continued system sales growth and digital mix expansion, reaching a Q1 record of approximately $6 billion."

Earnings and Revenue Discussion

During first-quarter 2022, the company's adjusted earnings of $1.05 missed the Zacks Consensus Estimate of $1.07. In the prior-year quarter, the company had reported adjusted earnings of $1.07.

Quarterly revenues of $1,547 million lagged the consensus mark of $1,596 million. However, the top line increased 4% year over year. The upside can be attributed to an increase in franchise and property revenues.

Worldwide system sales — excluding foreign currency translation — improved 8% year over year, with Taco Bell, KFC and Pizza Hut rising 8%, 9% and 3%, respectively, year over year.

Yum Brands, Inc. Price, Consensus and EPS Surprise Yum Brands, Inc. Price, Consensus and EPS Surprise

Yum Brands, Inc. price-consensus-eps-surprise-chart | Yum Brands, Inc. Quote

Divisional Performance

YUM! Brands primarily announces results under four divisions — KFC, Pizza Hut, Taco Bell and Habit Burger Grill.

For first-quarter 2022, revenues from KFC totaled $660 million, up 6% year over year. Comps in the division increased 3% year over year compared with growth of 8% reported in the prior-year quarter.

The segment's operating margin declined 400 basis points (bps) year over year to 44.1%. In the quarter under review, KFC Division opened 587 gross new restaurants.

At Pizza Hut, revenues amounted to $244 million, down 3% on a year-over-year basis. Comps in the quarter were flat year over year.

The segment's operating margin expanded 140 bps year over year to 42.1%. Pizza Hut Division opened 334 gross new restaurants in the first quarter.

Taco Bell's revenues were $517 million, up 6% from the year-ago quarter's levels. Comps in the segment increased 5% year over year compared with 9% growth reported in the year-ago quarter. Its operating margin declined 70 bps year over year to 35.7%.

Taco Bell opened 63 gross new restaurants in the quarter under review.

The Habit company sales amounted to $122 million during the first quarter. Comps in the division increased 3% year over year. In the quarter under review, the company opened 13 gross new restaurants in the United States and Cambodia.

Other Financial Details

As of Mar 31, 2022, cash and cash equivalents totaled $365 million compared with $486 million on Dec 31, 2021. Long-term debt at the end of the reported quarter was $11,332 million compared with $11,178 million at the 2021-end.

Zacks Rank & Key Picks

Yum! Brands carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are BBQ Holdings, Inc. , Dave & Buster's Entertainment, Inc. (PLAY - Free Report) and Arcos Dorados Holdings Inc. (ARCO - Free Report) .

BBQ Holdings sports a Zacks Rank #1 (Strong Buy). BBQ Holdings has a long-term earnings growth of 14%. Shares of the company have increased 9.2% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BBQ Holdings' 2022 sales and EPS suggests growth of 40.9% and 66.2%, respectively, from the year-ago period's levels.

Dave & Buster's flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 212%, on average. Shares of the company have appreciated 2.2% in the past year.

The Zacks Consensus Estimate for Dave & Buster's current-year sales and EPS suggests growth of 24.4% and 49.3%, respectively, from the year-ago period's levels.

Arcos Dorados carries a Zacks Rank #2 (Buy). Arcos Dorados has a long-term earnings growth of 31.3%. Shares of the company have surged 32.5% in the past year.

The Zacks Consensus Estimate for Arcos Dorados' 2022 sales and EPS suggests growth of 16.6% and 66.7%, respectively, from the year-ago period's levels.


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