Yum! Brands (NYSE:YUM) Issues Quarterly Earnings Results, Beats Expectations By $0.04 EPS

Key Points

• Yum! Brands beat quarterly earnings expectations: Adjusted EPS was $1.62 versus the $1.58 consensus, while revenue rose 12.2% year over year to $2.17 billion, slightly below estimates.
• Core brands performed unevenly: KFC posted 6% system-sales growth, while Taco Bell’s same-store sales fell 2% quarter-to-date after a food-safety issue; management said traffic is gradually recovering.
• Pizza Hut’s planned $2.7 billion sale is expected to close in August, with proceeds earmarked largely for share repurchases after partial debt repayment. Yum! also has a separate $4 billion buyback authorization.

Yum! Brands (NYSE:YUM - Get Free Report) posted its quarterly earnings data on Thursday. The restaurant operator reported $1.62 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $1.58 by $0.04, FiscalAI reports. The business had revenue of $2.17 billion during the quarter, compared to the consensus estimate of $2.18 billion. Yum! Brands had a negative return on equity of 23.51% and a net margin of 20.48%.The firm's quarterly revenue was up 12.2% compared to the same quarter last year. During the same quarter in the prior year, the company earned $1.44 earnings per share.

Here are the key takeaways from Yum! Brands' conference call:

• Q2 results were solid excluding Pizza Hut: system sales grew 7%, units increased 6%, same-store sales rose 4%, and core operating profit grew 8%. Digital sales approached $9 billion, reaching 61% of system sales.
• KFC delivered 6% system sales growth, including 7% unit growth, and is on track for its best development year ever. Management is targeting stronger long-term same-store sales through global menu innovation, refreshed branding, loyalty expansion, and improved restaurant economics.
• Taco Bell U.S. same-store sales were down 2% quarter-to-date through July 27 following an industry-wide food-safety issue, and third-quarter equity restaurant margins are expected to decline to 19%–21%. Management said trends have improved steadily and expects the impact to be temporary.
• Pizza Hut’s sale for $2.7 billion is expected to close in August, allowing Yum! to focus on KFC, Taco Bell, and Habit. After paying down part of its revolver, management expects to allocate most remaining proceeds toward share repurchases, subject to market conditions.
• Yum! is expanding its Byte technology platform, loyalty programs, and AI capabilities to improve personalization, operating efficiency, and franchisee economics. Taco Bell’s digital mix reached 47%, while Voice AI was deployed in more than 900 Taco Bell restaurants.

Yum! Brands Stock Performance

Shares of YUM traded up $5.12 during trading hours on Thursday, hitting $157.04. The company had a trading volume of 3,298,511 shares, compared to its average volume of 2,085,115. The stock has a market capitalization of $43.28 billion, a price-to-earnings ratio of 25.33, a P/E/G ratio of 1.89 and a beta of 0.56. The firm has a fifty day moving average price of $153.93 and a 200-day moving average price of $156.73. Yum! Brands has a 52-week low of $137.33 and a 52-week high of $170.14.

Yum! Brands Dividend Announcement

The business also recently declared a quarterly dividend, which was paid on Friday, June 12th. Stockholders of record on Wednesday, May 27th were given a $0.75 dividend. This represents a $3.00 annualized dividend and a dividend yield of 1.9%. The ex-dividend date of this dividend was Wednesday, May 27th. Yum! Brands's payout ratio is currently 48.39%.

Analyst Upgrades and Downgrades

A number of analysts have recently weighed in on YUM shares. Deutsche Bank Aktiengesellschaft set a $177.00 target price on shares of Yum! Brands in a research report on Thursday, April 30th. Evercore reissued an "outperform" rating on shares of Yum! Brands in a research report on Tuesday, June 16th. BMO Capital Markets reissued a "market perform" rating and set a $168.00 price objective on shares of Yum! Brands in a research note on Monday, May 4th. Morgan Stanley upgraded shares of Yum! Brands from an "equal weight" rating to an "overweight" rating and upped their price objective for the stock from $180.00 to $185.00 in a report on Wednesday, June 3rd. Finally, UBS Group reaffirmed a "buy" rating on shares of Yum! Brands in a research note on Thursday, June 18th. Eleven research analysts have rated the stock with a Buy rating and seven have issued a Hold rating to the company's stock. According to data from MarketBeat, Yum! Brands presently has an average rating of "Moderate Buy" and an average price target of $174.81.

Key Yum! Brands News

Here are the key news stories impacting Yum! Brands this week:

• Positive Sentiment: Adjusted earnings exceeded expectations. Yum reported second-quarter adjusted EPS of $1.62, ahead of the roughly $1.58-$1.59 consensus and up from $1.44 a year earlier. Revenue increased 12.2% year over year to $2.17 billion, broadly in line with estimates. Yum! Brands Reports Second-Quarter Results
• Positive Sentiment: Taco Bell delivered strong pre-outbreak performance. Robust sales at Taco Bell, along with global expansion and restaurant-level margin performance, helped offset weaker results at Pizza Hut and drove the quarterly profit beat. Yum! Brands Q2 Earnings Beat Estimates on Taco Bell Strength
• Positive Sentiment: Management says Taco Bell traffic is recovering. The company has removed affected lettuce, emphasized food-safety actions, and is using discounts and new menu items to rebuild customer trust. Taco Bell same-store sales were down 2% quarter-to-date through July 27, but reports indicate the sharpest decline occurred shortly after the outbreak and demand has begun to improve. Taco Bell Parent Company Says Sales Already Recovering
• Neutral Sentiment: The outlook remains dependent on the outbreak’s duration. The reported quarter ended June 30 and largely predates the food-safety crisis, limiting its usefulness as a guide to current Taco Bell sales. Investors will watch for additional costs, brand damage, and the pace of traffic normalization. Cyclospora Outbreak Clouds Strong Earnings
• Negative Sentiment: Pizza Hut remains a weak spot, and the company’s revenue was slightly below some analyst estimates. The outbreak also creates near-term uncertainty for Yum’s most important growth brand despite the early recovery signals.

Insider Activity at Yum! Brands

In other Yum! Brands news, CEO Christopher Lee Turner sold 250 shares of the firm's stock in a transaction dated Wednesday, July 1st. The shares were sold at an average price of $160.42, for a total transaction of $40,105.00. Following the completion of the sale, the chief executive officer directly owned 64,032 shares in the company, valued at approximately $10,272,013.44. This trade represents a 0.39% decrease in their position. The transaction was disclosed in a document filed with the Securities & Exchange Commission, which can be accessed through this hyperlink. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Also, CEO Scott Mezvinsky sold 277 shares of Yum! Brands stock in a transaction dated Wednesday, July 1st. The stock was sold at an average price of $160.42, for a total transaction of $44,436.34. Following the completion of the transaction, the chief executive officer directly owned 483 shares of the company's stock, valued at $77,482.86. This trade represents a 36.45% decrease in their ownership of the stock. Additional details regarding this sale are available in the official SEC disclosure. The transaction was executed under a pre-arranged Rule 10b5-1 trading plan. Insiders sold a total of 12,423 shares of company stock worth $1,953,721 in the last ninety days. 0.14% of the stock is currently owned by company insiders.

Hedge Funds Weigh In On Yum! Brands

A number of hedge funds have recently added to or reduced their stakes in the company. Magnolia Capital Advisors LLC boosted its stake in Yum! Brands by 2.0% during the 4th quarter. Magnolia Capital Advisors LLC now owns 3,292 shares of the restaurant operator's stock valued at $498,000 after purchasing an additional 63 shares during the last quarter. Hilltop Holdings Inc. raised its stake in shares of Yum! Brands by 2.8% in the fourth quarter. Hilltop Holdings Inc. now owns 2,525 shares of the restaurant operator's stock worth $382,000 after purchasing an additional 68 shares during the last quarter. Parkside Financial Bank & Trust lifted its holdings in shares of Yum! Brands by 1.2% during the fourth quarter. Parkside Financial Bank & Trust now owns 6,180 shares of the restaurant operator's stock valued at $935,000 after purchasing an additional 74 shares in the last quarter. Financial Engines Advisors L.L.C. lifted its holdings in shares of Yum! Brands by 2.2% during the third quarter. Financial Engines Advisors L.L.C. now owns 3,527 shares of the restaurant operator's stock valued at $536,000 after purchasing an additional 76 shares in the last quarter. Finally, 44 Wealth Management LLC boosted its position in shares of Yum! Brands by 3.4% during the second quarter. 44 Wealth Management LLC now owns 2,827 shares of the restaurant operator's stock valued at $419,000 after buying an additional 92 shares during the last quarter. 82.37% of the stock is currently owned by hedge funds and other institutional investors.

Yum! Brands declared that its board has initiated a stock repurchase program on Tuesday, June 16th that authorizes the company to repurchase $4.00 billion in shares. This repurchase authorization authorizes the restaurant operator to buy up to 9.4% of its shares through open market purchases. Shares repurchase programs are generally an indication that the company's board of directors believes its shares are undervalued.

About Yum! Brands

Yum! Brands, Inc NYSE: YUM is a global quick-service restaurant company that develops, operates and franchises a portfolio of well-known restaurant brands. The company's principal brands are KFC, Pizza Hut and Taco Bell, each focused on distinct product categories—KFC on fried chicken and related menu items, Pizza Hut on pizza and complementary offerings, and Taco Bell on Mexican-inspired quick-service food. Yum! is headquartered in Louisville, Kentucky and was formed as Tricon Global Restaurants in 1997 when PepsiCo spun off its restaurant businesses, later adopting the Yum! Brands name.

The company's operating model centers on brand development, system growth and franchising; a large portion of its restaurants are operated by independent franchisees, and Yum! generates revenue through franchise royalties and fees in addition to sales from company-operated locations.

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