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YUM! Brands (YUM) Q1 Earnings Meet Estimates, Decline Y/Y

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YUM! Brands, Inc. (YUM - Free Report) reported mixed first-quarter 2020 results, wherein earnings were on par with the Zacks Consensus Estimate, while revenues beat the same. 

Following the results, the company’s shares rose 0.8% in pre-market trading session.

Earnings & Revenues

Yum! Brands, Inc. Price, Consensus and EPS Surprise

 

The company’s adjusted earnings of 64 cents met the Zacks Consensus Estimate. In the prior-year quarter, the company had reported adjusted earnings of 82 cents.

YUM! Brands’ total revenues of $1,263 million rose 0.7% year over year and surpassed the consensus estimate of $1,193 million. The upside can be attributed to increased sales as well as franchise and property revenues, and franchise contributions for advertising and other services.

Worldwide system sales — excluding foreign currency translation — declined 3% year over year, with KFC and Pizza Hut falling 2% and 9%, respectively. However, this was partially offset by 4% growth at Taco Bell.

The company also opened 65 net new units and acquired 276 Habit Burger Grill units, indicating net unit growth of 4%.

Divisional Performance

YUM! Brands primarily reports results under three divisions — KFC, Pizza Hut and Taco Bell.

For the first quarter of 2020, revenues from KFC totaled $566 million. Notably, it remained on par with the prior-year levels. Comps at this division declined 8% against the year-ago quarter’s growth of 5%.

This segment’s operating margin fell 200 basis points (bps) year over year to 39.7% primarily due to lower same-store sales and high bad debt expenses, partially offset by net new unit growth.

In the quarter under review, KFC Division opened 333 gross new restaurants.

At Pizza Hut, revenues amounted to $235 million, down 3.3% on a year-over-year basis. Comps were down 11% in the reported quarter. Notably, comps were flat in first-quarter 2019.

The segment’s operating margin was down 740 bps year over year to 32.7% owing to lower comps and higher bad debt expenses.

Pizza Hut Division opened 127 gross new restaurants in the first quarter.

Taco Bell’s revenues were $453 million, up 1.8% from the year-ago quarter. Comps rose 1% in the reported quarter compared with the year-ago quarter’s growth of 4%. Its operating margin was up 70 bps year over year to 31.7%. It was primarily driven by lower general and administrative expenses in the quarter.

Taco Bell recorded 55 gross new restaurants openings during the quarter.

Other Financial Details

Cash and cash equivalents as of Mar 31, 2020, totaled $1,154 million compared with $605 million on Dec 31, 2019. Long-term debt at the end of the reported quarter was $11,059 million compared with $10,131 million at 2019-end. 

Due to the coronavirus pandemic, the company has suspended its share repurchase programs.

Zacks Rank & Key Picks

YUM! Brands carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Retail-Wholesale sector are Sprouts Farmers Market, Inc. (SFM - Free Report) , Nautilus, Inc. and SpartanNash Company (SPTN - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sprouts Farmers has a three-five year earnings per share growth rate of 3.7%

Nautilus and SpartanNash’s 2020 earnings are expected to rise 82.4% and 26.4%, respectively.

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