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Why Is Yum China (YUMC) Down 2% 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 lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Yum China due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Yum China Q1 Earnings and Revenues Surpass Estimates
Yum China reported impressive first-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis. The upside can be attributed to robust total system sales growth and new unit contribution.
Earnings & Revenue Discussion
In first-quarter 2024, the company reported adjusted earnings per share (EPS) of 71 cents, beating the Zacks Consensus Estimate of 66 cents. The bottom line moved up 2.9% from 69 cents reported a year ago.
Quarterly revenues of $2.96 billion outpaced the consensus mark of $2.94 billion. The top line inched up 1% on a year-over-year basis. Excluding foreign currency translation, revenues increased 7% year over year.
Total system sales increased 6% year over year. The upside can be attributed to the net new unit contribution of 8%. System sales at KFC and Pizza Hut increased 7% and 4% (excluding foreign currency translation), respectively.
During the quarter, YUMC's same-store sales reached 97% of the previous year's level, despite strong performance in the same period last year.
Operating Highlights
In first-quarter 2024, total costs and expenses amounted to $2.6 billion compared with $2.5 billion reported in the prior-year quarter.
The restaurant margin was 17.6% compared with 20.3% a year ago. The downside was due to increased value-for-money offerings to drive traffic and wage inflation, which was partially offset by favorable commodity prices.
During the quarter, adjusted operating profit totaled $374 million compared with $419 million a year ago. Adjusted net income amounted to $287 million compared with $292 million in the prior-year quarter.
Balance Sheet
As of Mar 31, cash and cash equivalents were $883 million compared with $1.13 billion as of Dec 31, 2023. Inventories were $345 million compared with $424 million as of Dec 31, 2023.
In the first quarter, YUMC repurchased nearly 16.6 million shares for $681 million. As of Mar 31, the company had $853 million available for the buyback program.
Management declared a quarterly cash dividend of 16 cents per common share. The dividend will be payable on Jun 18 to shareholders of record as of May 28.
Unit Development and Other Updates
In first-quarter 2024, Yum China opened 378 net new stores. As of Mar 31, the total restaurant count reached 15,022.
In the quarter under review, Yum China’s delivery contributed 39% to KFC and 37% to Pizza Hut's company sales.
Digital orders contributed 89% to KFC and Pizza Hut's company sales, in line with the previous-year quarter’s levels. Loyalty programs of KFC and Pizza Hut led to year-over-year growth by increasing to more than 485 million members.
Retained 2024 Outlook
Yum China still projects 1,500-1,700 new store openings this year. Management continues to project capital expenditures between $700-$850 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Yum China has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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. Notably, Yum China has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Yum China (YUMC) Down 2% Since Last Earnings Report?
It has been about a month since the last earnings report for Yum China Holdings (YUMC - Free Report) . Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Yum China due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Yum China Q1 Earnings and Revenues Surpass Estimates
Yum China reported impressive first-quarter 2024 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and the bottom line increased on a year-over-year basis. The upside can be attributed to robust total system sales growth and new unit contribution.
Earnings & Revenue Discussion
In first-quarter 2024, the company reported adjusted earnings per share (EPS) of 71 cents, beating the Zacks Consensus Estimate of 66 cents. The bottom line moved up 2.9% from 69 cents reported a year ago.
Quarterly revenues of $2.96 billion outpaced the consensus mark of $2.94 billion. The top line inched up 1% on a year-over-year basis. Excluding foreign currency translation, revenues increased 7% year over year.
Total system sales increased 6% year over year. The upside can be attributed to the net new unit contribution of 8%. System sales at KFC and Pizza Hut increased 7% and 4% (excluding foreign currency translation), respectively.
During the quarter, YUMC's same-store sales reached 97% of the previous year's level, despite strong performance in the same period last year.
Operating Highlights
In first-quarter 2024, total costs and expenses amounted to $2.6 billion compared with $2.5 billion reported in the prior-year quarter.
The restaurant margin was 17.6% compared with 20.3% a year ago. The downside was due to increased value-for-money offerings to drive traffic and wage inflation, which was partially offset by favorable commodity prices.
During the quarter, adjusted operating profit totaled $374 million compared with $419 million a year ago. Adjusted net income amounted to $287 million compared with $292 million in the prior-year quarter.
Balance Sheet
As of Mar 31, cash and cash equivalents were $883 million compared with $1.13 billion as of Dec 31, 2023. Inventories were $345 million compared with $424 million as of Dec 31, 2023.
In the first quarter, YUMC repurchased nearly 16.6 million shares for $681 million. As of Mar 31, the company had $853 million available for the buyback program.
Management declared a quarterly cash dividend of 16 cents per common share. The dividend will be payable on Jun 18 to shareholders of record as of May 28.
Unit Development and Other Updates
In first-quarter 2024, Yum China opened 378 net new stores. As of Mar 31, the total restaurant count reached 15,022.
In the quarter under review, Yum China’s delivery contributed 39% to KFC and 37% to Pizza Hut's company sales.
Digital orders contributed 89% to KFC and Pizza Hut's company sales, in line with the previous-year quarter’s levels. Loyalty programs of KFC and Pizza Hut led to year-over-year growth by increasing to more than 485 million members.
Retained 2024 Outlook
Yum China still projects 1,500-1,700 new store openings this year. Management continues to project capital expenditures between $700-$850 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, Yum China has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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. Notably, Yum China has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.