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Why Is Yum China (YUMC) Up 5.3% Since Last Earnings Report?
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It has been about a month 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 drivers.
Yum China Q1 Earnings Miss Estimates, Revenues Top
Yum China reported first-quarter 2022 results, wherein earnings missed the Zacks Consensus Estimate, but revenues beat the same. While the top line increased from the prior-year quarter's levels, the bottom line declined on a year-over-year basis.
Earnings & Revenue Discussion
During first-quarter 2022, the company reported adjusted diluted earnings of 24 cents. The figure lagged the Zacks Consensus Estimate of 29 cents. The bottom line declined 56% from 54 cents reported in the year-ago quarter.
Quarterly revenues of $2,668 million surpassed the consensus mark of $2,609 million. The top line improved 4% on a year-over-year basis. Excluding foreign currency translation, the top line rose 2% year over year.
Total system sales in the reported quarter decreased 4% year over year. System sales at KFC and Pizza Hut declined by 4% and 1%, respectively. Meanwhile, same-store sales dropped 8% year over year, primarily due to a decline of 9% at KFC and 5% at Pizza Hut. In March, same-store sales fell by more than 20% year over year. The dismal performance continued in April (preliminary) as same-store sales decreased more than 20% year over year.
Operating Highlights
During first-quarter 2022, total costs and expenses totaled $2,477 million, down 12% from $2,215 million reported in the prior-year quarter.
Restaurant margin in the quarter under review was 13.8%, down 490 basis points from the year-ago quarter's levels. The downside was primarily due to sales deleveraging, higher inflation in commodity, wage and utility costs, and a rise in rider cost related to rising delivery volume.
During the quarter, adjusted operating profit totaled $193 million, down 44% from the year-ago quarter's levels. Adjusted net income amounted to $102 million compared with $233 million in the prior-year quarter.
Balance Sheet
As of Mar 31, 2022, cash and cash equivalents amounted to $1,047 million compared with $1,136 million as of Dec 31, 2021. Inventories during the first quarter were $345 million compared with $432 million in the previous quarter.
During the first quarter, the company repurchased $232 million worth of stock at an average price of $46.57. As of Mar 31, the company had approximately $1.4 billion available for the buyback program.
The company declared a quarterly cash dividend of 12 cents per common share. The dividend will be payable on Jun 21, 2022, to shareholders of record as of May 31, 2022.
Unit Development and Other Updates
During first-quarter 2022, Yum China opened 522 gross new restaurants driven by the development of the KFC and Pizza Hut brands. As of Mar 31, the company's total restaurant count was 12,117, up 1,392 stores year over year.
During the quarter under review, the company's delivery accounted for nearly 36% of KFC and Pizza Hut's company sales, up nearly five percentage points from the prior-year quarter's levels.
Digital orders during the quarter contributed 88% to KFC and Pizza Hut's company sales. During the first quarter, KFC and Pizza Hut loyalty programs increased to more than 370 million members.
2022 Outlook
In 2022, Yum China anticipates opening approximately 1,000 to 1,200 new stores. The company expects solid expansion related to KFC and Pizza Hut stores. Capital expenditures in 2022 are forecast in the range of $800 million to $1000 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -101.56% due to these changes.
VGM Scores
At this time, Yum China has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 #4 (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?
It has been about a month 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 drivers.
Yum China Q1 Earnings Miss Estimates, Revenues Top
Yum China reported first-quarter 2022 results, wherein earnings missed the Zacks Consensus Estimate, but revenues beat the same. While the top line increased from the prior-year quarter's levels, the bottom line declined on a year-over-year basis.
Earnings & Revenue Discussion
During first-quarter 2022, the company reported adjusted diluted earnings of 24 cents. The figure lagged the Zacks Consensus Estimate of 29 cents. The bottom line declined 56% from 54 cents reported in the year-ago quarter.
Quarterly revenues of $2,668 million surpassed the consensus mark of $2,609 million. The top line improved 4% on a year-over-year basis. Excluding foreign currency translation, the top line rose 2% year over year.
Total system sales in the reported quarter decreased 4% year over year. System sales at KFC and Pizza Hut declined by 4% and 1%, respectively. Meanwhile, same-store sales dropped 8% year over year, primarily due to a decline of 9% at KFC and 5% at Pizza Hut. In March, same-store sales fell by more than 20% year over year. The dismal performance continued in April (preliminary) as same-store sales decreased more than 20% year over year.
Operating Highlights
During first-quarter 2022, total costs and expenses totaled $2,477 million, down 12% from $2,215 million reported in the prior-year quarter.
Restaurant margin in the quarter under review was 13.8%, down 490 basis points from the year-ago quarter's levels. The downside was primarily due to sales deleveraging, higher inflation in commodity, wage and utility costs, and a rise in rider cost related to rising delivery volume.
During the quarter, adjusted operating profit totaled $193 million, down 44% from the year-ago quarter's levels. Adjusted net income amounted to $102 million compared with $233 million in the prior-year quarter.
Balance Sheet
As of Mar 31, 2022, cash and cash equivalents amounted to $1,047 million compared with $1,136 million as of Dec 31, 2021. Inventories during the first quarter were $345 million compared with $432 million in the previous quarter.
During the first quarter, the company repurchased $232 million worth of stock at an average price of $46.57. As of Mar 31, the company had approximately $1.4 billion available for the buyback program.
The company declared a quarterly cash dividend of 12 cents per common share. The dividend will be payable on Jun 21, 2022, to shareholders of record as of May 31, 2022.
Unit Development and Other Updates
During first-quarter 2022, Yum China opened 522 gross new restaurants driven by the development of the KFC and Pizza Hut brands. As of Mar 31, the company's total restaurant count was 12,117, up 1,392 stores year over year.
During the quarter under review, the company's delivery accounted for nearly 36% of KFC and Pizza Hut's company sales, up nearly five percentage points from the prior-year quarter's levels.
Digital orders during the quarter contributed 88% to KFC and Pizza Hut's company sales. During the first quarter, KFC and Pizza Hut loyalty programs increased to more than 370 million members.
2022 Outlook
In 2022, Yum China anticipates opening approximately 1,000 to 1,200 new stores. The company expects solid expansion related to KFC and Pizza Hut stores. Capital expenditures in 2022 are forecast in the range of $800 million to $1000 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -101.56% due to these changes.
VGM Scores
At this time, Yum China has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 #4 (Sell). We expect a below average return from the stock in the next few months.