By: Craig Bowles
Yum! Brands, Inc. (YUM) is slated to report 2Q 2017 earnings before the open of trading on Thursday, August 3rd. 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 $0.61 (range $0.57 to $0.65) (Source: Yahoo! Finance). Consensus was $0.61 three months ago.
- Revenues: Analysts expect $1.42 bln (range $1.36 bln to $1.45 bln).
- Yum Brands has a P/E of 27.5 vs a 5-year average of 26.9; Price/Sales of 4.5 vs a 5-year average of 2.6; Price/Cash Flow of 24.3 vs a 5-year average of 16.3. Dividend Yield at 1.9% vs a 5-year average of 2.2%.
- Analysts view Yum! with 11 Buy, 14 Hold, and 0 (1 last qtr) Sell ratings, according to MarketBeat.com.
- Insiders sold 38,080 shares over the last three months and sold a net 309,882 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), Domino’s Pizza (DPZ), McDonald’s (MCD), and Wendy’s (WEN).
- Yum! Brands shares have a 1-day average price change on earnings of 3.79%. Options are pricing in an implied move of 3.89% off earnings.
- 07/18: Pizza Hut is hiring 14,000 new delivery drivers as it tries to become the Pizza King again, according to a post on TheStreet.com.
- 06/26: Yum Brands sold of 28 KFC eateries across Tasmania to Collins Foods, according to a post on MarketWatch.com.
- 06/08: Mizuho Securities initiated coverage on Yum! Brands with a Neutral rating as the company is in the late innings of the transition with an uphill battle for justifying further multiple expansion, according to a post on StreetInsider.com.
- 05/30: Cowen maintained an Outperform rating on Yum! Brands after Taco Bell’s investor day reinforced their confidence in their above-consensus long term comp estimates, while they believe 2Q is also trending well, according to a post on StreetInsider.com.
- 05/26: Oppenheimer maintained an Outperform rating on Yum! Brands following Taco Bell management meetings. With Taco Bell making up 1/3 of YUM’s profits, the segment as a powerful catalyst to achieving an above-Street earnings power view, according to a post on StreetInsider.com.
Yum! Brands’ shares in 2017 finally pushed through the 2015/16 $66 resistance area in the seasonally strong first half of the year. Point and figure charts show the trend at $66. (Chart courtesy of StockCharts.com)
Yum Brands is led by Taco Bell and KFC while Pizza Hut struggles with intense competition. KFC’s fried chicken apparel seems like a reach. Yum is expected to return $7 billion to shareholders over the next few years. Insider selling has lightened up the past three months and that probably helped allow the stock to move higher. The company beat/missed analyst consensus by an average of 3c over the past four quarters. Estimize consensus for EPS excluding items of $0.63 on revenue of $1.412 bln compares to analyst consensus of $0.61 on revenue of $1.42 bln.
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