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In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 4.2%. The top line declined 3% year over year, while the bottom line increased 9% from the prior-year quarter’s figure.
YUM surpassed earnings estimates in three out of the trailing four quarters. The average surprise over this period is 3.9%, as shown in the chart below.
Image Source: Zacks Investment Research
Trend in Estimate Revision
The Zacks Consensus Estimate for second-quarter earnings per share (EPS) has declined to $1.32 from $1.33 in the past seven days. The projected figure indicates a 6.4% drop from the year-ago EPS of $1.41. The consensus mark for revenues is pegged at $1.80 billion, indicating 6.5% year-over-year growth.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Yum! Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Yum! Brands has an Earnings ESP of +1.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #3 at present.
YUM's top line in second-quarter 2024 is likely to have been aided by strong same-store sales growth and expansion efforts domestically and internationally. The stellar performance of its flagship brand, KFC, is expected to play a significant role in driving its overall revenue growth.
One of the key drivers behind Yum! Brands' success is its innovative menu strategy. Its integration of a recommended ordering system powered by AI and machine learning is anticipated to have a positive impact on its operational efficiency and customer experience. By leveraging data analytics and AI-driven insights, the company aims to personalize the ordering experience for customers, thereby enhancing satisfaction and driving incremental sales.
The company’s digital sales, which totaled $8 billion and rose 11% year over year, are likely to have continued the uptrend in the quarter to be reported. Attributes of ongoing kiosk deployment, greater adoption of click-and-collect and stable third-party aggregator sales are likely to have aided the digital sales.
Same-store sales are estimated to demonstrate growth of 0.9% year over year in the to-be-reported quarter. Our model predicts, KFC and Taco Bell sale-store sales to increase 2% and 1% year over year, respectively.
In second-quarter 2024, our model predicts KFC, Taco Bell and Habit Burger revenues to increase 10.5%, 1.4% and 20.2% from the year-ago levels to $753.3 million, $629.6 million and $1170.6 million, respectively. However, we expect Pizza Hut's revenues to drop 2.2% from the prior-year levels to $236.6 million.
The bottom line in the quarter to be reported is likely to have been hurt by an increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs. A competitive retail environment is likely to have put pressure on the restaurants’ costs. The company is susceptible to profit margin pressure due to relentless expansion. Costs associated with brand positioning in all key markets and ongoing investment initiatives are likely to have hurt margins. It remains cautious of the uncertain macro environment. Our model expects total costs and expenses to increase 8.5% from the year-earlier levels.
Price Performance & Valuation
Year to date, the stock has increased 2.9% compared with the industry’s 7.9% drop. Other industry players like Darden Restaurants, Inc. (DRI - Free Report) , down 11.5%, Starbucks Corporation (SBUX - Free Report) , down 21.9%, and Restaurant Brands International Inc. (QSR - Free Report) , down 7.9%.
Image Source: Zacks Investment Research
Let's assess the value YUM offers to investors at its current levels.
From the valuation point of view, the stock is trading at a discount. YUM’s forward 12 month price-to-earnings ratio stands at 22.25, lower than the industry’s ratio of 22.4 but higher than the S&P 500's ratio of 21.19.
Image Source: Zacks Investment Research
Investment Thoughts
YUM continues to benefit from ongoing kiosk deployment, greater adoption of click-and-collect and stable third-party aggregator sales. Focus on unit development commitments, menu innovation and deployment of proprietary digital and AI-powered platforms bode well. YUM! Brands believes it can nearly triple its current global presence over the long term and consolidate franchisees in Latin America and the Caribbean are likely to drive growth.
Given Yum! Brands' solid historical performance, innovative growth strategies, and a reasonable valuation, a hold position seems prudent. The company’s ability to adapt and innovate, coupled with its strong brand portfolio, positions it well for future growth despite current challenges. Investors should keep an eye on the upcoming earnings report for further insights into the company’s financial health and strategic direction.
Image: Bigstock
Should You Bite Into Yum! Brands (YUM) Before Q2 Results?
Yum! Brands, Inc. (YUM - Free Report) is slated to release second-quarter 2024 results on Aug 6, before the opening bell.
In the last reported quarter, the company’s earnings missed the Zacks Consensus Estimate by 4.2%. The top line declined 3% year over year, while the bottom line increased 9% from the prior-year quarter’s figure.
YUM surpassed earnings estimates in three out of the trailing four quarters. The average surprise over this period is 3.9%, as shown in the chart below.
Image Source: Zacks Investment Research
Trend in Estimate Revision
The Zacks Consensus Estimate for second-quarter earnings per share (EPS) has declined to $1.32 from $1.33 in the past seven days. The projected figure indicates a 6.4% drop from the year-ago EPS of $1.41. The consensus mark for revenues is pegged at $1.80 billion, indicating 6.5% year-over-year growth.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model predicts an earnings beat for Yum! Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.
Earnings ESP: Yum! Brands has an Earnings ESP of +1.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #3 at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Influencing Q2 Performance
YUM's top line in second-quarter 2024 is likely to have been aided by strong same-store sales growth and expansion efforts domestically and internationally. The stellar performance of its flagship brand, KFC, is expected to play a significant role in driving its overall revenue growth.
One of the key drivers behind Yum! Brands' success is its innovative menu strategy. Its integration of a recommended ordering system powered by AI and machine learning is anticipated to have a positive impact on its operational efficiency and customer experience. By leveraging data analytics and AI-driven insights, the company aims to personalize the ordering experience for customers, thereby enhancing satisfaction and driving incremental sales.
The company’s digital sales, which totaled $8 billion and rose 11% year over year, are likely to have continued the uptrend in the quarter to be reported. Attributes of ongoing kiosk deployment, greater adoption of click-and-collect and stable third-party aggregator sales are likely to have aided the digital sales.
Same-store sales are estimated to demonstrate growth of 0.9% year over year in the to-be-reported quarter. Our model predicts, KFC and Taco Bell sale-store sales to increase 2% and 1% year over year, respectively.
In second-quarter 2024, our model predicts KFC, Taco Bell and Habit Burger revenues to increase 10.5%, 1.4% and 20.2% from the year-ago levels to $753.3 million, $629.6 million and $1170.6 million, respectively. However, we expect Pizza Hut's revenues to drop 2.2% from the prior-year levels to $236.6 million.
The bottom line in the quarter to be reported is likely to have been hurt by an increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs. A competitive retail environment is likely to have put pressure on the restaurants’ costs. The company is susceptible to profit margin pressure due to relentless expansion. Costs associated with brand positioning in all key markets and ongoing investment initiatives are likely to have hurt margins. It remains cautious of the uncertain macro environment. Our model expects total costs and expenses to increase 8.5% from the year-earlier levels.
Price Performance & Valuation
Year to date, the stock has increased 2.9% compared with the industry’s 7.9% drop. Other industry players like Darden Restaurants, Inc. (DRI - Free Report) , down 11.5%, Starbucks Corporation (SBUX - Free Report) , down 21.9%, and Restaurant Brands International Inc. (QSR - Free Report) , down 7.9%.
Image Source: Zacks Investment Research
Let's assess the value YUM offers to investors at its current levels.
From the valuation point of view, the stock is trading at a discount. YUM’s forward 12 month price-to-earnings ratio stands at 22.25, lower than the industry’s ratio of 22.4 but higher than the S&P 500's ratio of 21.19.
Image Source: Zacks Investment Research
Investment Thoughts
YUM continues to benefit from ongoing kiosk deployment, greater adoption of click-and-collect and stable third-party aggregator sales. Focus on unit development commitments, menu innovation and deployment of proprietary digital and AI-powered platforms bode well. YUM! Brands believes it can nearly triple its current global presence over the long term and consolidate franchisees in Latin America and the Caribbean are likely to drive growth.
Given Yum! Brands' solid historical performance, innovative growth strategies, and a reasonable valuation, a hold position seems prudent. The company’s ability to adapt and innovate, coupled with its strong brand portfolio, positions it well for future growth despite current challenges. Investors should keep an eye on the upcoming earnings report for further insights into the company’s financial health and strategic direction.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.