Yum! Brands tops Q3 profit estimates, misses on revenue

Yum! Brands (YUM) topped third-quarter profit estimates on Nov. 3, but revenue came in below forecasts as the company completed the sale of its Pizza Hut brand.

Diluted GAAP earnings per share were $5.92, against $1.41 a year earlier, helped by a pre-tax gain of $1.7 billion on the Pizza Hut sales. Excluding special items, EPS was $1.56, down 1% from $1.58 a year earlier.

Yum! Brands operates more than 44,000 KFC, Taco Bell and Habit Burger & Grill restaurants across 150-plus countries and territories. The company said it had 955 gross new units in the quarter, and its unit count rose 7% excluding Pizza Hut.

Here's how the company did:

• Adjusted EPS: $1.56 vs. $1.58 a year earlier, and $1.50 against the consensus estimate
• GAAP diluted EPS: $5.92 vs. $1.41 a year earlier
• Revenue: $2.05 billion vs. $1.98 billion a year earlier, below the $2.08 billion consensus estimate

Pizza Hut sale

The company completed the sale of Pizza Hut in two transactions. The Pizza Hut business in mainland China went to Yum China Holdings, Inc. on Aug. 7 for $1.2 billion in proceeds.

The rest of the brand, excluding mainland China, went to LongRange Capital, a private equity firm, on Sept. 1 for $1.2 billion of net proceeds. The company said the transactions produced a pre-tax gain of $1.7 billion.

Division results

KFC system sales rose 8% in the quarter, or 6% excluding foreign currency translation. Division operating profit climbed to $425 million from $388 million a year earlier.

Taco Bell Division operating profit fell 5% to $255 million, and its same-store sales declined 4%. Taco Bell U.S. system sales declined 3%.

CEO Chris Turner said, “Yum! has entered its next chapter of growth, having completed the divestiture of Pizza Hut, with a sharper focus on our Raise the B.A.R. priorities.” He added that Taco Bell U.S. has been outpacing the QSR industry on same-store sales growth since the end of September.

Shareholder returns and targets

The company returned $1.8 billion to shareholders through dividends and share repurchases year to date. Dividends declared were 75 cents per share in the quarter, up from 71 cents a year earlier.

Yum! said it targets 5% unit growth, 7% system sales growth excluding F/X, and at least 8% core operating profit growth over an extended period. The company first announced those metrics in 2022.

Excluding Pizza Hut from both years, core operating profit grew 1% in the quarter and 6% year to date. The company said it cannot forecast special items or F/X changes, so it gives no GAAP operating profit growth estimate.