Yum China (NYSE: YUMC) reported Q3 EPS of $0.58, $0.03 better than the analyst estimate of $0.55. Revenue for the quarter came in at $2.3 billion versus the consensus estimate of $2.38 billion.

Third Quarter Highlights

• Total revenues increased 5% year over year to $2.3 billion from $2.2 billion (8% year over year increase excluding foreign currency translation (\"F/X\")).
• Total system sales grew 8% year over year, with growth of 10% at KFC and 3% at Pizza Hut, excluding F/X.
• Same-store sales grew 2% year over year, with a 3% increase at KFC and a 1% increase at Pizza Hut, excluding F/X.
• Restaurant margin was 17.7%, compared with 17.6% in the prior year period.
• Operating Profit increased 11% year over year to $300 million from $269 million (14% year over year increase excluding F/X).
• Effective tax rate was 26.9%.
• Net Income increased 11% to $223 million from $203 million in the prior year period, primarily due to the increase in operating profit and mark to market gain from our equity investment in Meituan Dianping.
• Diluted EPS increased 14% to $0.58 from $0.51 in the prior year period (8% year over year increase excluding the $0.03 per share mark to market gain from our equity investment in Meituan Dianping).
• Opened 231 new restaurants during the quarter, bringing total store count to 8,917 across more than 1,300 cities.

CEO and CFO Comments

Joey Wat, CEO of Yum China, commented, "We are pleased with our continued strong performance in the third quarter, which was driven by our competitive positioning, leading digital capabilities and ongoing innovation across the business. We achieved our 12th consecutive quarter of system sales growth since the spin-off, highlighting the strength of our business model and demonstrating our ability to effectively adapt to changing market conditions. KFC delivered solid sales and profit growth as we strategically decreased promotion intensity to protect margins. Pizza Hut maintained positive sales momentum with a decline in margin during the quarter due to the important and necessary long-term investments in the revitalization program."

"We will continue to build on KFC's resilient business model, cement the revitalization of Pizza Hut, invest in the growth of our smaller brands and sharpen our industry-leading digital ecosystem, which enables us to meet customer demands and manage the business effectively," continued Ms. Wat. "We are cautiously optimistic about the future because we see significant growth opportunities in China, and we will focus on leveraging our competitive advantages to succeed in this dynamic environment."

Andy Yeung, CFO of Yum China, added, "I am very excited to have joined the Yum China team and am pleased to be reporting another strong set of quarterly results, which highlight Yum China's strength in many areas. We continued rapid expansion of our store network and maintained very healthy cash payback for our new stores. We also delivered strong sales, operating profit and EPS growth despite continued pressure from higher chicken and labor costs. In addition, we returned $109 million to shareholders through dividends and share repurchases in the quarter. Looking ahead, we will continue to focus on driving sales and managing costs while making prudent investments to drive long-term growth. As always, we remain committed to driving significant overall value to our shareholders."

2019 Outlook

The Company continues to expect fiscal year 2019 targets as follows:

• Between 800 and 850 gross new units.
• Capital expenditures between $475 million and $525 million.
• Effective tax rate below 28%, excluding any impact from the Company's equity investment in Meituan Dianping.

The Company provides its effective tax rate outlook excluding any impact from its investment in Meituan Dianping, which will be subject to mark to market accounting and may be significant.

For earnings history and earnings-related data on Yum China (YUMC) click here.