On July 13, 2016, after the Market closed, Yum! Brands (YUM) posted its 2Q16 revenue at $3.0 billion and EPS (earnings per share) at $0.75. Compared to 2Q15, revenue fell by 3.1%, and adjusted EPS rose by 8.7%. Yum! Brands operates Pizza Hut, KFC, and Taco Bell brands.
YUM’s EPS beat analysts’ estimates of $0.74, but its revenue was lower than analysts’ estimates of $3.1 billion. Investor confidence was raised for the following reasons:
- Operating profit growth for fiscal 2016 rose from 12% to 14%.
- The announcement of a spin-off of YUM’s China unit was on track and is expected to be completed by October 31, 2016.
As a result, YUM’s share price rose 2.5%.
Year-to-date, Yum! Brands’ share price has returned 20.8%. In 2014, the company was hit by food-quality issues in China. It was the second such incident for YUM in the last few years.
By spinning off its China operations, the company wants to mitigate risks associated with its exposure to the Chinese market. This has increased shareholder confidence and the YUM share price.
In this series, we’ll be taking a look at 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.
Let’s start by looking at Yum! Brands’ 2Q16 revenue.