Yum! Brands (YUM) Misses Q3 EPS by 1c

October 5, 2016 4:17 PM EDT

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Yum! Brands (NYSE: YUM) reported Q3 EPS of $1.09, $0.01 worse than the analyst estimate of $1.10. Revenue for the quarter came in at $3.32 billion versus the consensus estimate of $3.49 billion.

% Change
System Sales


Net New Units

GAAPOperating Profit

CoreOperating Profit

China Division +3 (1) +7 +7 +14
KFC Division +7 +4 +3 +11 +19
Pizza Hut Division Even (1) +1 (6) (5)
Taco Bell Division +5 +3 +3 +9 +9
Worldwide +4 +1 +3 +8 +11


Greg Creed, CEO, said “Yum! Brands delivered third-quarter core operating profit growth of 11% and EPS growth, excluding Special Items, of 9%. For the full year, we are raising our core operating profit growth guidance from at least 14% to at least 15%.

In the third quarter, I was pleased with both KFC’s and Taco Bell’s performance, each of which returned to a focus on core menu items, but in ways that were distinctive, disruptive and relevant. Both brands had accelerating same-store sales growth, despite sluggish QSR industry trends, especially in the U.S. Excluding China, our brand divisions in aggregate delivered core operating profit growth of 11%, which was ahead of our expectations. System sales for the brand divisions excluding China grew 5% in constant currency, driven by KFC where system sales grew 7% with international emerging markets up an impressive 12%. We are excited about the momentum we are seeing in our base business as we embark on the next chapter of growth at our company.

Sales were off to a good start in the first six weeks of the quarter in the China Division. However, anticipated tougher laps in the second half of the third quarter were compounded by an international court ruling on claims regarding the South China Sea, which triggered a series of regional protests and negative sentiment against a few international companies with well-known Western brands. If not for this event, we believe the China Division would have delivered its fifth consecutive quarter of positive same-store sales growth. The good news is the incident was short-lived and the sales impact continued to dissipate through August and September. Despite the protests, Pizza Hut Casual Dining continued its trend of quarterly sequential improvement.

2016 marks the beginning of a massive transformation for Yum! Brands. Step one is the formal separation of our China business, which will become one of China’s largest publicly-traded retail companies with meaningful growth opportunities supported by U.S. governance. New Yum! Brands will become a unique and focused world-class franchisor with consistent, stable cash flow generation and an efficient cost structure that encourages growth. We look forward to sharing the details of our strategic plans for both companies at our New York investor conference on Tuesday, October 11.”

For earnings history and earnings-related data on Yum! Brands (YUM) click here.

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