Why Yum! Brands’ Share Price Fell Due to Positive 1Q16 Results

Yum! Brands (YUM) operates Pizza Hut, KFC, and Taco Bell brands. It posted its 1Q16 revenue at $2.6 billion and EPS (earnings per share) at $0.93 on April 20, 2016. Compared to 1Q15, its 1Q16 revenue fell by 0.1%. Its EPS grew by 14.8%.

Yum! Brands’ 1Q16 EPS beat Wall Street analysts’ estimate of $0.83. It failed to meet the revenue expectation of $2.7 billion. Its share price appreciated by 13% since the announcement of its 4Q15 results on February 3, 2016. It fell by 1% due to the announcement of its 1Q16 results. On the same day, the share prices of Yum! Brands’ peers McDonald’s (MCD), Domino’s Pizza (DPZ), and Papa John’s (PZZA) fell by 2.1%, 2.1%, and 1.7%, respectively. The share price of the Guggenheim S&P 500 Pure Growth ETF (RPG) fell by 0.2%. RPG has 44% of its holdings invested in restaurant and travel companies. Along with weakness in the broader market, the skepticism about a spin-off could have led to the decline in Yum! Brands’ share price.

In this series, we’ll discuss Yum! Brands’ performance. We’ll compare it with the same quarter last year. We’ll also explore the factors that could drive the company’s revenue in the coming quarters. Finally, we’ll look at the company’s valuation multiple and analysts’ estimates and recommendations.

First, we’ll discuss Yum! Brands’ 1Q16 revenue.