By: Craig Bowles
Yum! Brands, Inc. (YUM) is slated to report 1Q 2017 earnings before the open of trading on Thursday, May 4th. Results are expected to be released at approximately 7:00 a.m. ET followed by a conference call the following morning at 8:15 a.m. available through Yum Brands Investor Relations. Yum! Brands operates quick service restaurants in the United States and internationally and is a component of the S&P 500. It operates in five segments: YUM Restaurants International, Taco Bell U.S., KFC U.S., Pizza Hut U.S., and YUM Restaurants India. The YUM China division was spun-off on November 1 and became Yum! China (YUMC).
Outliers & Strategy
- Earnings Per Share (EPS) Excluding Items: The Street estimate is $0.60 (range $0.55 to $0.65) (Source: Yahoo! Finance). Consensus was $0.62 three months ago.
- Revenues: Analysts expect $1.34 bln (range $1.30 bln to $1.42 bln).
- Adjusted Earnings Per Share (EPS) Guidance for FY2017: The current Street estimate is $2.72 (range $2.50 to $2.82).
- Yum Brands has a P/E of 26.6 vs a 5-year average of 26.9; Price/Sales of 4.1 vs a 5-year average of 2.6; Price/Cash Flow of 21.9 vs a 5-year average of 16.3. Dividend Yield at 2.4% vs a 5-year average of 2.2%.
- Analysts view Yum! with 10 (11 last qtr) Buy, 12 Hold, and 1 Sell ratings, according to MarketBeat.com.
- Insiders sold 96,973 shares over the last three months and sold a net 654,999 shares in the past year. (source: NASDAQ.com) Yum! Brands stock buybacks are normally announced in Q4 and added $2 bln in November to May 2016’s $4.2 bln.
- Yum! Brands results could impact other quick service restaurant companies, such as Papa John’s (PZZA), McDonald’s (MCD), and Wendy’s (WEN).
- Yum! Brands shares have a 1-day average price change on earnings of 4.11%. Options are pricing in an implied move of 3.07% off earnings.
- 04/24: Cowen reiterated an Outperform rating on Yum! Brands following a detail update to model under company’s new reporting structure with China results in KFC and Pizza Hut segments released before company earnings, according to a post on StreetInsider.com.
- 03/28: Yum Brands’ CEO Greg Creed believes that in a decade or so artificial intelligence could replace human workers in the food services industry, according to a post on TheStreet.com.
- 03/10: Evercore ISI upgraded Yum! Brands to Outperform from In Line due to the recent pullback in the shares and solid visibility into multi-year earnings growth from factors like G&A reductions and share repurchases that occur regardless of operating performance, according to a post on StreetInsider.com.
Yum! Brands’ shares in 2017 have been finding resistance above $66 since May 2015 but we’re still in the seasonally strong first half of the year. Point and figure charts show a balance area around $64. (Chart courtesy of StockCharts.com)
Yum Brands will restate its financial results and reclassify some non-service cost components of pension and post-retirement benefits. Yum is expected to return $7 billion to shareholders over the next few years. Insiders showed some selling recently with the stock testing above 2015 highs. The company beat/missed analyst consensus by an average of 5c over the past four quarters. Estimize consensus for EPS excluding items of $0.65 on revenue of $1.366 bln compares to analyst consensus of $0.60 on revenue of $1.34 bln.
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