A month has gone by since the last earnings report for Yum Brands (YUM Quick QuoteYUM - Free Report) . Shares have lost about 1.2% 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 due for a breakout? 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! Brands Q2 Earnings Top, Revenues Miss

YUM! Brands reported mixed second-quarter 2024 results, with adjusted earnings surpassing the Zacks Consensus Estimate and total revenues missing the same. On the other hand, the bottom line declined while the top line grew on a year-over-year basis.

The top-line performance reflects solid contributions from the company’s Taco Bell and KFC divisions. The Taco Bell division’s performance was encouraging during the quarter on the back of the desirable menu innovation and the introduction of a new platform offering, Cantina Chicken. Also, KFC international’s contributions added to the uptrend.

However, increased company restaurant expenses and franchise advertising and other services expenses marred the bottom line. Also, foreign currency translation unfavorably impacted the quarter’s performance.

Nonetheless, increased gross new unit counts, drive-thru Voice AI technology expansion at Taco Bell and other strategic initiatives are likely to boost the company’s performance in 2024 and beyond.

Earnings and Revenue Discussion

The company reported adjusted earnings per share of $1.35, which topped the Zacks Consensus Estimate of $1.32 by 2.3%. However, the metric declined 4% year over year.

Quarterly revenues of $1.763 billion missed the consensus mark of $1.797 billion by 1.9% but grew 4% year over year.

Worldwide system sales — excluding foreign currency translation — increased 3% year over year, with Taco Bell rising 7% and KFC rising 2%. The metric remained flat year over year for Pizza Hut.

Divisional Performance

YUM! Brands primarily announces results under four divisions — KFC, Pizza Hut, Taco Bell and Habit Burger Grill.

KFC: The revenues at the KFC division totaled $717 million, up 5% year over year. Our model predicted the metric to increase 10.5% from a year ago. Comps decreased 3% year over year against a gain of 13% reported in the prior-year quarter.

The division’s operating margin contracted 110 basis points (bps) year over year to 46.6%. In the quarter under review, the KFC division opened 598 gross new restaurants across 57 countries.

Pizza Hut: This division’s revenues amounted to $239 million, down 2% year over year. Our model predicted the metric to decrease 2.2% from the prior-year level. Comps decreased 3% year over year against growth of 4% in the year-ago quarter.

The division’s operating margin expanded 200 bps year over year to 39.3%. Pizza Hut division opened 236 gross new restaurants across 30 countries.

Taco Bell: The quarterly revenues of this division were $666 million, up 7% year over year. Our model precited the metric to increase 1.4% from the year-earlier level. Comps increased 5% year over year compared with 4% in the prior-year quarter.

The division’s operating margin expanded 70 bps year over year to 37.5%. Taco Bell opened 56 gross new restaurants across 11 countries.

Habit Burger Grill: The division’s revenues amounted to $141 million, down 0.7% year over year. Our model predicted the metric to increase 20.2% year over year.

Comps declined 6% year over year. In the quarter under review, the division opened four gross new restaurants.

Other Financial Details

As of Jun 30, 2024, YUM! Brands’ cash and cash equivalents totaled $404 million compared with $512 million at 2023-end. Long-term debt, as of Jun 30, was $11.14 billion compared with $11.142 billion as of 2023-end.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Yum has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. 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 has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Yum belongs to the Zacks Retail - Restaurants industry. Another stock from the same industry, McDonald's (MCD Quick QuoteMCD - Free Report) , has gained 6.9% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

McDonald's reported revenues of $6.49 billion in the last reported quarter, representing a year-over-year change of -0.1%. EPS of $2.97 for the same period compares with $3.17 a year ago.

McDonald's is expected to post earnings of $3.15 per share for the current quarter, representing a year-over-year change of -1.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -0.3%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for McDonald's. Also, the stock has a VGM Score of F.