Yum! Brands (YUM) Reports In-Line Q2 Earnings - Analyst Blog

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Global quick-service restaurant (QSR) firm Yum! Brands ( YUM ) posted Q2 earnings after the bell Wednesday, where top and bottom line results matched Zacks consensus estimates of 73 cents per share on $3.2 billion in sales. YUM shares are selling down in the after-market on the news.

While better-than-expected growth in its extremely important China region was the good news for Yum!, the bad news was that year-over-year Q2 comparable store sales ("comps") came short of expectations for two of the company's three components: Pizza Hut fell 3% (+0.1% was estimated) and Taco Bell comps gained 2% (3.6% was estimated).

Nearly half of Yum!'s total revenues come from China, so its 15% comps year over year is a welcome sight for investors. In fact, Yum! Brands is often cited as a good way to gauge how well the Chinese consumer is doing economically, as Yum! restaurants -- particularly KFC -- are extremely popular in China.


The problem for the company is clearly on the domestic side, where more-nutritious eating habits for the American consumer, along with loads of QSR competition in the U.S., are taking a "bite" out of Yum! Brands' sales. Comps were down for Yum! in Q1 as well, though this was then attributed mostly to poor weather in the winter months of early 2014.

Yum!'s Q2 conference call is scheduled for tomorrow morning, so we're sure to hear lots of questions about how domestic restaurants planning on combatting weakening market share. Taco Bell, for instance, has been expanding into more breakfast options, and its Cantina Power Menu launches on Thursday. But unless YUM is planning on marketing pizza and fried chicken for breakfast, it's tough to see how this build-out will have a broader effect.

Especially considering that today, YUM shares hit their all-time highs. Sure, a turnaround in China is welcome news, but Yum!'s board has got a lot to swallow currently. Yum! Brands is trading down roughly 2.6% in late Wednesday trading.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Earnings , Stocks

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