Yum Brands Winning Recipe Continues to Hit the Spot in Q3

Andrew Klips  |

Yum Brands (YUM) apparently added the right ingredients together this past quarter as the operator of Taco Bell, Kentucky Fried Chicken and Pizza Hut recorded a 23-percent rise in net income during the third quarter and raised its full-year profit guidance to a growth rate of at least 13%, or $3.24 a share. Yum had previously projected profits of $3.22 per share.

For the third quarter, Yum reported that revenue rose to $471 million, or $1 per share, as compared to $383 million, or 80 cents a share, in the same quarter a year ago. Excluding one-time items like re-franchising costs, earnings rose to 99 cents from 83 cents. Revenue perked to $3.57 billion, up from $3.27 billion.

Wall Street was expecting a profit of 97 cents a share on revenue of $3.65 billion.

Whereas many global companies have cried weakness in China as a source of decreasing revenue, Yum’s growth in the world’s second largest economy remained stable, albeit slower than recent quarters. Same-store-sales (stores open at least one year) in China rose by 6 percent (compared to figures in excess of 20 percent in recent quarters) and operating profits surged by 22 percent in Q3 when adjusted for currency fluctuations.

Stateside, Yum appears to be getting some traction after posting dismal numbers in 2011. Operating profit rose 13 percent in the quarter, fueled in part by the revamped menu at Taco Bell that lifted same-store-sales by 7 percent. Pizza Hut and KFC saw rises in same-store-sales of 6 percent and 4 percent, respectively, during the latest quarter.

With the U.S. market absolutely flooded with competition, Yum has primarily set its sights for growth overseas. The Louisville, Kentucky-based company is aiming to change the ratio that has about 18,000 restaurants in the States, with only about 5,000 in China and a minimal percentage of its businesses in smaller emerging markets.

Yum said it is planning on opening a record number of stores overseas this year; calling for at least 1,750 new locations.
Yum is one the first reporting companies as earnings season is once again upon us. Alcoa kicked-off yesterday with earnings after the closing bell that showed Alcoa (AA) swinging to a third quarter loss, although adjusted earnings and revenue topped analyst expectations.

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