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Why Yum! Brands Stock Fell after Its 4Q17 Earnings


Feb. 13 2018, Updated 3:08 p.m. ET

4Q17 performance

Yum! Brands (YUM) posted its 4Q17 earnings before the market opened on February 8, 2018. It posted adjusted EPS (earnings per share) of $0.96 on revenues of $1.58 billion. Compared to 4Q16, its EPS rose 21.5%, and its revenue declined 16.3%.

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Stock performance

Analysts were expecting Yum! Brands to post EPS of $0.80 on revenues of $1.59 billion. Its SSSG (same-store sales growth) of 2% failed to meet analysts’ expectation of 2.4%. The lower-than-expected 4Q17 revenue and SSSG led to the fall in Yum! Brands stock. The stock was also affected by a weakness in the broader equity markets due to an increase in bond yields, rising inflation, increased labor wages, and the expectation of the Fed raising interest rates. By the end of February 9, 2018, Yum! Brands was trading at $79.31, which represents a fall of 1% since the announcement of its 4Q17 earnings.

Year-to-date performance

Last year was a good year for Yum! Brands with its stock rising 28.9%. However, since the beginning of 2018, the stock has fallen 2.8%. In comparison, Domino’s Pizza (DPZ) and Papa John’s International (PZZA) have returned 9.1% and 1.8%, respectively, year-to-date. The broader comparative index, the S&P 500 Index (SPX-INDEX), and the Consumer Discretionary Select Sector SPDR ETF (XLY) have returned -2% and 2.2%, respectively.

Series overview

In this series, we’ll look at Yum! Brands’ 4Q17 performance and compare it with analysts’ estimates. We’ll also look at management’s guidance and analysts’ estimates for 2018. Finally, we’ll look at analysts’ valuation multiples and target prices.

In the next part, we’ll look at Yum! Brands’ 4Q17 revenue.


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