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%.
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.
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.”
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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