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In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 20.5% and 0.4%, respectively. Earnings and sales increased 135% and 25% on a year-over-year basis, respectively.
Yum China’s earnings topped the consensus mark in three of the trailing four quarters and missed the same on the remaining one occasion, the average surprise being 31.7%.
How are Estimates Placed?
The Zacks Consensus Estimate for the third quarter’s earnings per share has remained unchanged at 68 cents in the past 30 days. However, the estimated figure indicates a 38.8% increase from the year-ago quarter’s earnings of 49 cents per share.
For revenues, the consensus mark is pegged at $3.04 billion, suggesting an increase of 13.1% from the prior-year quarter’s figure of $2.69 billion.
Key Factors to Consider
Revenues
Yum China’s top line in the quarter is quite likely to have been driven by its robust unit expansion initiatives, menu innovation, focus on digitalization and loyalty programs along with digital and delivery capabilities. The company has been increasingly shifting toward digital and content marketing to expand its customer base. It has adopted a high-grade delivery strategy, which includes collaborating with aggregators to source traffic and fulfill orders by the company’s KFC riders.
Although the uncertain macroeconomic environment is concerning, the aforementioned tailwinds are likely to have aided the company’s top line. In the second quarter, the company hit more than 445 million loyalty members, with member sales increasing to a record 66%, which will likely boost its top line in the to-be-reported quarter as well. Furthermore, digital orders during the last quarter, which accounted for 90% of KFC and Pizza Hut's company sales, are expected to have continued robust performance during the third quarter.
For the to-be-reported quarter, our model predicts KFC revenues to be $2.24 billion, indicating growth of 11.2% year over year. Moreover, we expect Pizza Hut’s revenues to be $702.9 million, indicating a 25.3% increase from the year-ago period.
Also, we anticipate same-store sales of the company to increase 3.1% compared with the prior-year quarter, wherein the metric did not witness any year-over-year growth.
Margins
Meanwhile, the ongoing inflationary environment, along with increased total costs and expenses, are likely to have put pressure on the margins of Yum China. However, these headwinds are likely to have been more than offset by the company’s sales leveraging and cost-structure rebasing. Also, solid same-store sales growth and new unit contributions add to the same.
For the third quarter, our model expects the adjusted operating margin to be 14.7% compared with 11.8% reported in the prior-year quarter.
What Our Model Indicates
Our proven model does not conclusively predict an earnings beat for Yum China this time around. The company does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.
Earnings ESP: The Earnings ESP for YUMC is 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: YUMC currently carries a Zacks Rank of 3.
Stocks Poised to Beat on Earnings
Here are some stocks from the Zacks Retail-Wholesale sector, which according to our model, have the right combination of elements to post an earnings beat.
WEN’s earnings for the to-be-reported quarter are expected to increase 8.3%. The company reported better-than-expected earnings in the trailing four quarters, the average surprise being 4.8%.
Yum! Brands, Inc. (YUM - Free Report) has an Earnings ESP of +1.80% and a Zacks Rank of 3.
YUM’s earnings for the to-be-reported quarter are expected to increase 15.6%. The company reported better-than-expected earnings in two of the trailing four quarters and missed the same on other two occasions, the average surprise being 2%.
McDonald's Corporation (MCD - Free Report) has an Earnings ESP of +1.16% and a Zacks Rank of 3.
MCD is expected to register 11.6% growth in earnings for the to-be-reported quarter. Notably, the company reported better-than-expected earnings in all four quarters, the average surprise being 9.5%.
Image: Bigstock
Yum China (YUMC) to Report Q3 Earnings: Here's What to Expect
Yum China Holdings, Inc. (YUMC - Free Report) is scheduled to report third-quarter 2023 results on Oct 31 after market close.
In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 20.5% and 0.4%, respectively. Earnings and sales increased 135% and 25% on a year-over-year basis, respectively.
Yum China’s earnings topped the consensus mark in three of the trailing four quarters and missed the same on the remaining one occasion, the average surprise being 31.7%.
How are Estimates Placed?
The Zacks Consensus Estimate for the third quarter’s earnings per share has remained unchanged at 68 cents in the past 30 days. However, the estimated figure indicates a 38.8% increase from the year-ago quarter’s earnings of 49 cents per share.
Yum China Price and EPS Surprise
Yum China price-eps-surprise | Yum China Quote
For revenues, the consensus mark is pegged at $3.04 billion, suggesting an increase of 13.1% from the prior-year quarter’s figure of $2.69 billion.
Key Factors to Consider
Revenues
Yum China’s top line in the quarter is quite likely to have been driven by its robust unit expansion initiatives, menu innovation, focus on digitalization and loyalty programs along with digital and delivery capabilities. The company has been increasingly shifting toward digital and content marketing to expand its customer base. It has adopted a high-grade delivery strategy, which includes collaborating with aggregators to source traffic and fulfill orders by the company’s KFC riders.
Although the uncertain macroeconomic environment is concerning, the aforementioned tailwinds are likely to have aided the company’s top line. In the second quarter, the company hit more than 445 million loyalty members, with member sales increasing to a record 66%, which will likely boost its top line in the to-be-reported quarter as well. Furthermore, digital orders during the last quarter, which accounted for 90% of KFC and Pizza Hut's company sales, are expected to have continued robust performance during the third quarter.
For the to-be-reported quarter, our model predicts KFC revenues to be $2.24 billion, indicating growth of 11.2% year over year. Moreover, we expect Pizza Hut’s revenues to be $702.9 million, indicating a 25.3% increase from the year-ago period.
Also, we anticipate same-store sales of the company to increase 3.1% compared with the prior-year quarter, wherein the metric did not witness any year-over-year growth.
Margins
Meanwhile, the ongoing inflationary environment, along with increased total costs and expenses, are likely to have put pressure on the margins of Yum China. However, these headwinds are likely to have been more than offset by the company’s sales leveraging and cost-structure rebasing. Also, solid same-store sales growth and new unit contributions add to the same.
For the third quarter, our model expects the adjusted operating margin to be 14.7% compared with 11.8% reported in the prior-year quarter.
What Our Model Indicates
Our proven model does not conclusively predict an earnings beat for Yum China this time around. The company does not have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat.
Earnings ESP: The Earnings ESP for YUMC is 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.
Zacks Rank: YUMC currently carries a Zacks Rank of 3.
Stocks Poised to Beat on Earnings
Here are some stocks from the Zacks Retail-Wholesale sector, which according to our model, have the right combination of elements to post an earnings beat.
The Wendy's Company (WEN - Free Report) has an Earnings ESP of +2.30% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
WEN’s earnings for the to-be-reported quarter are expected to increase 8.3%. The company reported better-than-expected earnings in the trailing four quarters, the average surprise being 4.8%.
Yum! Brands, Inc. (YUM - Free Report) has an Earnings ESP of +1.80% and a Zacks Rank of 3.
YUM’s earnings for the to-be-reported quarter are expected to increase 15.6%. The company reported better-than-expected earnings in two of the trailing four quarters and missed the same on other two occasions, the average surprise being 2%.
McDonald's Corporation (MCD - Free Report) has an Earnings ESP of +1.16% and a Zacks Rank of 3.
MCD is expected to register 11.6% growth in earnings for the to-be-reported quarter. Notably, the company reported better-than-expected earnings in all four quarters, the average surprise being 9.5%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.