Why Investors Are Optimistic about Yum! Brands’ Q4 Earnings


Jan. 31 2019, Updated 11:34 a.m. ET

Stock performance

Yum! Brands (YUM), the company that owns the Pizza Hut, KFC, and Taco Bell brands, is scheduled to post its fourth-quarter earnings results before the market opens on February 7.

As of January 29, the company was trading at $92.67, a rise of 7.2% since its announcement of its third-quarter earnings results on October 31, 2018. The company is also trading at a 22.1% premium to its 52-week low of $75.88 and at a 1.6% discount to its 52-week high of $94.13.

Yum! Brands’ stock price was driven by its strong performance in the third quarter and investors’ optimism surrounding its implementation of technological advancements.

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In the third quarter, the company posted adjusted EPS of $1.04 on revenue of $1.39 billion, outperforming analysts’ EPS expectation of $0.83 and their revenue estimate of $1.38 billion. Also, the SSSGs (same-store sales growth) of KFC and Taco Bell beat analysts’ expectations. However, Pizza Hut’s sales continued to struggle, with its SSSG falling 1.0%.

During the company’s investor presentation on December 5, its management announced that it would be deploying kiosks at every Taco Bell restaurant in the United States by the end of 2019. Earlier, on December 4, Pizza Hut announced that it had signed a definitive agreement to acquire QuikOrder, an online ordering platform, which is expected to improve customers’ online experience.

Year-to-date performance

Last year, Yum! Brands stock returned 12.6%, outperforming the S&P 500 Index, which fell 6.2%. Since the beginning of 2019, YUM has risen 0.8%. In comparison, its peers Domino’s Pizza (DPZ) and Papa John’s (PZZA) have returned 10.8% and 6.3%, respectively. The broader comparative index, the Consumer Discretionary Select Sector SPDR ETF (XLY), has returned 6.8% during the period.

Series overview

With Yum! Brands’ fourth-quarter earnings around the corner, in this series, we’ll look at analysts’ revenue and EPS expectations for the company. We’ll also cover Yum! Brands’ valuation multiple and analysts’ recommendations for its stock. Let’s start by looking at Yum! Brands’ fourth-quarter revenue estimates.


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