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Yum China (YUMC) Likely to Benefit From Expansion Efforts
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Shares of Yum China Holdings, Inc. (YUMC - Free Report) are rallying on improving revenues driven by expansion efforts, menu innovations and robust digitalization. The stock has surged 42.9% in the past six months compared with the industry’s 19.1% gain.
In 2023, we expect the company’s revenues to improve 18.5% year over year to $11,337.1 million after witnessing a decline of 2.9% in 2022. Moreover, we expect KFC and Pizza Hut revenues to increase 17% and 24.4%, year over year, respectively.
Let’s delve deeper into the factors likely to spur the Zacks Rank #2 (Buy) company’s growth.
Growth Drivers
Unit expansion is one of the key growth drivers of Yum China. In fourth-quarter 2022, the company’s KFC and Pizza Hut brands had 419 and 97 new units opened, respectively. In 2023, YUMC intends to open 1,100 to 1,300 new stores across its brands.
Meanwhile, Yum China emphasizes expanding its supply-chain network to support store and portfolio growth and enhance intelligent-supply-chain operations. During second-quarter 2022, YUMC completed the construction of its two greenfield logistics centers in Chengdu.
Also, it initiated the construction of its Jiading Supply Chain Management Center in Shanghai. The venue will serve as the company's supply-chain-operations’ headquarter and support restaurants in eastern China. As of December 2022, the company had 33 logistics centers that improve its self-sufficiency in each province.
Image Source: Zacks Investment Research
Another riveting growth potential of Yum China resides in its continual menu innovation to encourage the top-line growth. KFC’s extraordinary performance is attributable to greater sales of menu offerings like crayfish burger, stuffed chicken wing and spicy chicken burger.
The company is also focusing on digitalization to drive growth. During the fourth quarter, the company initiated the rollout of a smart order system (featuring AI) at KFC outlets. The initiative enhances customer experience by reducing wait time and providing real-time order update. It also recommends food preparation plan to minimize stock outs and wastage.
This apart, the company added a robotic service at one-third of the Pizza Hut restaurants. YUMC stated that it has set aside $1-$1.5 billion for investment in the digital and technology space over the next five years.
Key Picks
Some other top-ranked stocks in the Zacks Retail-Wholesale sector are Chuy's Holdings, Inc. (CHUY - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Bloomin' Brands, Inc. (BLMN - Free Report) , each presently sporting a Zacks Rank #1 (Strong Buy).
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the year-ago period’s levels.
Arcos Dorados has a long-term earnings growth rate of 7.8%. Shares of ARCO have declined 5.7% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 8% and 11.4%, respectively, from the year-ago period’s levels.
Bloomin' Brands has a long-term earnings growth rate of 12.3%. The stock has risen 20.3% in the past year.
The Zacks Consensus Estimate for BLMN’s 2024 sales and EPS suggests growth of 2.4% and 5.5%, respectively, from the year-ago period’s levels.
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Yum China (YUMC) Likely to Benefit From Expansion Efforts
Shares of Yum China Holdings, Inc. (YUMC - Free Report) are rallying on improving revenues driven by expansion efforts, menu innovations and robust digitalization. The stock has surged 42.9% in the past six months compared with the industry’s 19.1% gain.
In 2023, we expect the company’s revenues to improve 18.5% year over year to $11,337.1 million after witnessing a decline of 2.9% in 2022. Moreover, we expect KFC and Pizza Hut revenues to increase 17% and 24.4%, year over year, respectively.
Let’s delve deeper into the factors likely to spur the Zacks Rank #2 (Buy) company’s growth.
Growth Drivers
Unit expansion is one of the key growth drivers of Yum China. In fourth-quarter 2022, the company’s KFC and Pizza Hut brands had 419 and 97 new units opened, respectively. In 2023, YUMC intends to open 1,100 to 1,300 new stores across its brands.
Meanwhile, Yum China emphasizes expanding its supply-chain network to support store and portfolio growth and enhance intelligent-supply-chain operations. During second-quarter 2022, YUMC completed the construction of its two greenfield logistics centers in Chengdu.
Also, it initiated the construction of its Jiading Supply Chain Management Center in Shanghai. The venue will serve as the company's supply-chain-operations’ headquarter and support restaurants in eastern China. As of December 2022, the company had 33 logistics centers that improve its self-sufficiency in each province.
Image Source: Zacks Investment Research
Another riveting growth potential of Yum China resides in its continual menu innovation to encourage the top-line growth. KFC’s extraordinary performance is attributable to greater sales of menu offerings like crayfish burger, stuffed chicken wing and spicy chicken burger.
The company is also focusing on digitalization to drive growth. During the fourth quarter, the company initiated the rollout of a smart order system (featuring AI) at KFC outlets. The initiative enhances customer experience by reducing wait time and providing real-time order update. It also recommends food preparation plan to minimize stock outs and wastage.
This apart, the company added a robotic service at one-third of the Pizza Hut restaurants. YUMC stated that it has set aside $1-$1.5 billion for investment in the digital and technology space over the next five years.
Key Picks
Some other top-ranked stocks in the Zacks Retail-Wholesale sector are Chuy's Holdings, Inc. (CHUY - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Bloomin' Brands, Inc. (BLMN - Free Report) , each presently sporting a Zacks Rank #1 (Strong Buy).
Chuy’s Holdings has a trailing four-quarter earnings surprise of 19.1%, on average. Shares of CHUY have increased 45% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 10.8% and 19%, respectively, from the year-ago period’s levels.
Arcos Dorados has a long-term earnings growth rate of 7.8%. Shares of ARCO have declined 5.7% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2024 sales and EPS suggests growth of 8% and 11.4%, respectively, from the year-ago period’s levels.
Bloomin' Brands has a long-term earnings growth rate of 12.3%. The stock has risen 20.3% in the past year.
The Zacks Consensus Estimate for BLMN’s 2024 sales and EPS suggests growth of 2.4% and 5.5%, respectively, from the year-ago period’s levels.