Yum! Brands (YUM) Trims FY14 EPS Outlook; Guides for FY15 EPS Grwoth of 10%+

Yum! Brands, Inc. (NYSE: YUM), in advance of its Annual Investor Meeting, now estimates mid-single-digit full-year 2014 EPS growth versus prior year, excluding Special Items. Yum! expects to deliver at least 10% EPS growth in 2015, excluding Special Items.

Greg Creed, CEO effective January 1, 2015, said, “We are firmly committed to returning to double-digit EPS growth in 2015, delivering at least 10% growth with the potential to do significantly better. We fully expect to bounce-back in China and benefit from tremendous sales leverage as sales rebound. We have solid plans to drive same-store sales growth and margin improvement in China, while continuing to open new restaurants with confidence in the world’s fastest-growing economy. Further, sustained momentum at our KFC and Taco Bell Divisions, and the recent relaunch of our Pizza Hut U.S. business are also expected to contribute to our double-digit EPS growth. Our brands are the global leaders in their respective categories, and we expect to build on this strength with breakthrough product innovation, insight-driven marketing and digital leadership in the years ahead.

“Overall, we expect to open over 2,100 new international restaurants next year, further strengthening our lead in emerging markets. We remain focused on the three keys to driving shareholder value: same-store sales growth, new-unit development and generating high returns on invested capital. I’m confident we’ll deliver full-year EPS growth of at least 10% in 2015 and produce consistent double-digit EPS growth over the long term.”

2014 EPS UPDATE

As previously reported, China Division sales were significantly impacted by adverse publicity in July regarding improper food handling practices by a former supplier. Sales continue to recover, but at a slower pace than expected. We estimate China Division full-year same-store sales will be negative mid-single digits. With this assumption, we now estimate mid-single-digit full-year EPS growth, excluding Special Items.

*** Yum! was previously looking for 2014 EPS growth to be between 6 and 10 percent from 2013.

2015 OVERALL GUIDANCE

Yum! Brands expects full-year EPS growth of at least 10%, excluding Special Items, with meaningful upside opportunity contingent primarily on the pace of our sales recovery in China. Our 2015 guidance is based on the following expectations and assumptions:

• China Division operating profit growth of at least 15%
• KFC Division operating profit growth of 10%
• Pizza Hut Division operating profit growth of 10%
• Taco Bell Division operating profit growth of 6%
• Over 2,100 gross new international units, including:
  • 700 new units in China
  • 700 new units at KFC
  • 600 new units at Pizza Hut
  • 125 new units in India
• 150 net new units at Taco Bell Division
• Global capital expenditures of approximately $1.2 billion
• Estimated tax rate for years 2015 – 2016 between 25% and 27%
• Foreign currency translation expected to have a negative impact of at least $20MM on earnings
• Interest expense expected to be about $145MM
• 2% reduction in average diluted shares outstanding as a result of share repurchases

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