Yum! Brands (NYSE: YUM) shares were up 2.2% on February 9, after the global restaurant chain operator reported mixed Q2 results. Revenues topped estimates, but earnings failed to meet analysts’ expectations due to higher costs leading to compressed margins.
Q4 adjusted earnings of $1.02 per share declined 12% year-over-year and fell short of analysts’ expectations of $1.09 per share. The company reported earnings of $1.15 per share for the prior-year period.
However, revenues grew 8% year-over-year to $1.89 billion and were modestly ahead of consensus estimates of $1.88 billion.
Compared to the prior-year quarter, YUM added 1,680 gross new units. Systemwide sales (excluding foreign currency translation) grew 9%, while same-store sales grew 5% with KFC growing at 10%, Taco Bell at 11%, and Pizza Hut at 4%.
On the downside, company restaurant margins declined during the quarter across Taco Bell, KFC and Pizza Hut.
Yum! Brands CEO, David Gibbs, commented, “We opened an astounding 4,180 gross units in 2021, marking the strongest growth year in Yum!’s history and setting a restaurant industry record for unit development. We also reached new heights in digital sales that topped $22 billion.”
Looking ahead towards FY2022, he further added, “I’m confident and energized heading into 2022, which marks Yum!’s 25th anniversary, as we continue to build the world’s most loved and trusted brands while delivering lasting value for our stakeholders.”
Wall Street’s Take
Ahead of the earnings, Stifel analyst Chris O’Cull reiterated a Buy rating on Yum! Brands with a price target of $145 (13.6% upside potential).
The Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 5 Buys and 5 Holds. The average Yum! Brands stock forecast of $146.89 implies 15.03% upside potential to current levels.
TipRanks’ Smart Score
Yum! Brands scored a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.