Yum! Brands Inc.
) reported fourth quarter 2012 adjusted earnings of 83 cents per
share, ahead of the Zacks Consensus Estimate by 2 cents. Earnings
surged 10% year over year on the back of outperformance at its
YUM! RESTAURANTS INTERNATIONAL (YRI), U.S. and INDIA division.
However, negative publicity arising from the recent allegation
against Yum!'s KFC in China regarding the quality of chicken
supplied to KFC has adversely impacted its performance during the
On a reported basis, Yum! Brands' quarterly earnings were 72
cents per share, down 3% year over year. In full year 2012, Yum!
Brands' adjusted earnings were $3.25 per share, up 13% year over
year. On a reported basis, earnings per share grew 23% to
In fourth quarter, the company reported a 1% year-over-year
increase in total revenue to $4,153.0 million, which surpassed
the Zacks Consensus Estimate of $4,127 million. In 2012, total
revenue increased 8% year over year to $13,633 million, in line
with the Zacks Consensus Estimate. The company has gained
in terms of sales from an additional business week in December
Behind the Headline Numbers
Excluding foreign currency translation, global system sales
remained consistent in fourth quarter whereas it has increased 5%
in 2012. Yum!'s India Division witnessed a considerable growth of
24% in system sales (foreign currency translation excluded) with
27% unit growth and 5% same-store sales growth.
In fourth quarter, Comparable-restaurant sales (comps) plunged
6% in China with an 8% decline in same-store sales for KFC owing
to the negative publicity. YRI division witnessed a 3% rise in
comps. Comps nudged up 3% in the U.S., with 5% and 4% rise at
Taco Bell and KFC, respectively, offsetting a 1% fall at Taco
In the quarter under review, Yum! Brands witnessed a dip in
its overall cost structure. Company-restaurant costs and general
and administrative (G&A) expenses fell 1% and 12%,
respectively. Although, China and the YRI division were able to
reduce their G&A costs, it was up by 2% at the U.S.
Operating profit expanded 6% year over year, excluding
foreign-currency translation. One of the company's major
geographic segments, YRI's profit was up 8% annually; and 10%
excluding foreign currency translation. The profit for China and
the U.S. were down by 3% and 5% annually, respectively.
While foreign currency translation helped China's operating
profit by $3 million, it bore an adverse impact of $5 million at
YRI. Operating profit at the U.S. division was adversely affected
by 12% due to the divestiture of Long John Silver's and A&W
In fourth quarter, restaurant margin inched up 0.1% to 14.4% as
margin including foreign currency rose 2.2% to 14.1% in the YRI
division and climbed up 3.3% to 16.7% at the U.S. segment, backed
by solid sales growth. However, China Division has
experienced a 1.9% fall in its restaurant margin.
The company has introduced 1,976 new units in 2012. It
includes 889 new openings in China, 138 in India and 949 new
restaurants opening at YRI. Of the total unit opening, 617
restaurants were launched in the emerging markets.
At quarter end, Yum! Brands had cash and cash equivalents of
$776.0 million with outstanding long-term debt of $2,932 million,
and shareholder equity of $2,253.0 million.
Share Repurchase & Dividend Hike
During the year, the company repurchased 14.9 million shares
worth $985 million at an average price of $66. The company has
also raised its dividend to $1.34 per share in 2012.
In the U.S. and YRI segment, YUM remains optimistic about
further improvement in operating profit. As the company's KFC
brand is currently under high pressure in China due to the
adverse media attention, Yum expects its comps in the region to
fall 25% in the first two months of first quarter 2013.
However, over the year, KFC comps are likely to recover, and
it should increase in fourth quarter. The company projects that
in 2013, its earnings per share will fall in mid-single digit
owing to low sales.
China remains a crucial player in Yum! Brands' growth. Hence,
the current turmoil in KFC China may be detrimental to the
company's overall business going forward. Although the company is
trying to overcome this adverse situation but it will take time
to completely recover.
YUM! currently carries a Zacks Rank #3 (Hold). Among its peers
) recently declared its fourth quarter 2012 earnings of $1.38 per
share which beat the Zacks Consensus Estimate as well as the
year-ago earnings of $1.33 per share. Its revenue was also grown
2.0% year over year to $6,952.1 million. For full year 2012, both
earnings per share of $5.36 and revenues of $27.6 billion grew 2%
year over year.
AFC Enterprises Inc.
) recently declared its preliminary fourth quarter and full year
2012 results. The company projects its adjusted earnings per
share for the full year of 2012 to be within $1.23-$1.24, up from
99 cents in 2011. AFC also provided a rosy outlook for 2013. AFC
currently holds a Zacks Rank #2 (Buy).
Yet another peer
Dunkin Brands Group, Inc.
) recently posted fourth-quarter and full year 2012. It currently
holds a Zacks Rank #2 (Buy).
AFC ENTERPRISES (AFCE): Free Stock Analysis
DUNKIN BRANDS (DNKN): Free Stock Analysis
MCDONALDS CORP (MCD): Free Stock Analysis
YUM! BRANDS INC (YUM): Free Stock Analysis
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