Yum Brands, the parent company of popular fast-food chains Taco Bell, Pizza Hut, and KFC, has experienced significant stock growth despite disappointing fourth-quarter earnings. The company’s stock initially dipped in premarket trading but managed to rebound, climbing up by 3%. Yum Brands reported a net income of $463 million, or $1.62 per share, compared to $371 million, or $1.29 per share, in the same quarter of the previous year. However, on an adjusted basis, the company’s earnings were $1.26 per share, falling short of the FactSet consensus of $1.40. Yum Brands attributed this shortfall to a 23-cent headwind caused by fluctuations in its quarterly tax rate.
In terms of revenue, Yum Brands saw a 1% increase to $2.04 billion compared to $2.02 billion in the same period last year. However, analysts surveyed by FactSet were expecting sales of $2.11 billion, highlighting a slight disappointment. The company’s same-store sales also grew by 1%, falling short of analysts’ expectations of 3.7%.
Looking at the performance of Yum Brands’ divisions, KFC experienced a 2% growth in same-store sales during the fourth quarter, compared to 5% growth in the previous year’s quarter. Taco Bell saw a 3% growth, down from 11% growth in the same period last year. Pizza Hut, on the other hand, faced a decline of 2% in same-store sales, in contrast to a 1% growth in the year-ago quarter.
Despite these setbacks, Yum Brands has achieved remarkable milestones during 2023. The company opened a record 4,754 gross units and made significant progress in scaling its proprietary digital and AI-driven ecosystem in partnership with its franchisees. Yum Brands’ CEO, David Gibbs, expressed optimism for the future, stating that the company expects to have over 30,000 KFC restaurants and 20,000 Pizza Hut restaurants by 2024, with a global total of over 60,000.
Yum Brands’ performance stands in contrast to some of its rivals in the fast-food industry. McDonald’s, for example, cited the war in the Middle East in its recent fourth-quarter results and expects “macro challenges” to continue in 2024. Starbucks also faced setbacks due to fighting in the Middle East, affecting its business both in the region and the United States. However, Chipotle Mexican Grill managed to surpass Wall Street’s estimates in its fourth-quarter results, with consumer demand and higher menu prices outweighing increased ingredient costs.
In terms of stock performance, Yum Brands’ stock has fallen by 0.8% in the last 52 weeks, while the S&P 500 index has gained 20.3%. McDonald’s stock rose by 0.3%, Starbucks saw a 1% increase, and Chipotle experienced a 1.8% rise.
Despite the disappointment in fourth-quarter earnings, Yum Brands’ ability to maintain stock growth highlights its resilience and potential for future success. As the company continues to expand its restaurant count and invest in digital and AI-driven technologies, investors may find Yum Brands’ stock an attractive option in the fast-food industry.
