Why Yum! Brands, Inc. Stock Popped Today

What happened

Shares of Yum! Brands, Inc. (NYSE: YUM) got a boost today after the fast-food giant posted better-than-expected results in its third-quarter earnings report, led by value-meal offerings like its new $1 nacho fries at Taco Bell. As a result, the stock finished the day up 4.6%.

So what

Same-store sales across the company, which owns Taco Bell, KFC, and Pizza Hut restaurants outside of China, increased 2%, and systemwide sales were up 5% as Yum! increased its unit count 4%. However, revenue fell 3%, to $1.39 billion, as the company continues to refranchise restaurants, but that squeaked in ahead of estimates at $1.38 billion. Same-store sales rose 5% at Taco Bell and 3% at KFC but fell 1% at Pizza Hut, as that chain continues to lose share to Domino’s Pizza. The company also opened 410 new units in the quarter, expanding all three brands.

Image source: Getty Images.

On the bottom line, core operating profit increased 2% and adjusted earnings per share surged 52%, to $1.04, with the help of a lower tax rate, easily beating expectations at $0.83. CEO Greg Creed touted the company’s continuing improvement, saying: “We are now two years into our three year transformation and remain firmly on-track to becoming more focused, more franchised and more efficient. The collective power of our three iconic brands, anchored by our four key growth drivers, is helping us deliver long-term sustainable growth and higher returns for our stakeholders.”

Now what

Yum maintained its full-year guidance, calling for global same-store sales growth of 2%-3%, systemwide sales growth of 5%-6%, and high-single-digit operating profit growth. Adjusting for the timing of refranchising and new revenue recognition standards, the company expects core operating profit to be flat.

With a long pipeline of growth ahead of it as it has three brands to expand globally, Yum! continues to look like a solid bet as it puts up steady growth.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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