Yum! Brands reported third-quarter adjusted earnings of $1.56 per share on November 3, beating the analyst consensus of $1.53. Revenue was $2.05 billion, below the $2.10 billion expected. Shares were trading at $157.05, down 0.35% at 12:51 p.m. EST, after opening near $163 and giving back their early gains.
Taco Bell same-store sales declined 4%, its first decrease in about six years and a steeper fall than analysts’ 0.9% forecast. CEO Chris Turner said the U.S. business had outpaced the quick-service restaurant industry since late September. Reuters reported that Taco Bell same-store sales were up about 1% so far in the current quarter, though that remains below the mid-to-high single-digit growth management cited in September.
KFC continued to expand, with system sales up 6% and unit growth of 7%, including 955 gross new restaurant openings. Operating profit rose 8% to $425 million. However, KFC same-store sales increased just 1%, missing the 2.1% expected. Across Yum! Brands, same-store sales were flat, compared with analysts’ forecast of 0.9% growth.
The company completed its Pizza Hut exit during the quarter. The transaction generated an estimated $1.7 billion pre-tax gain, lifting GAAP earnings per share to $5.92. Excluding Pizza Hut, core operating profit grew only 1%. Digital system sales exceeded $9 billion and represented 64% of the mix.
Management reiterated its long-term targets of 7% system sales growth, 5% net unit growth and more than 8% core operating profit growth. The 1% increase in core operating profit this quarter leaves a gap between current performance and that goal. Yum! Brands’ next report is expected to cover the December quarter; analysts’ consensus is $1.82 in earnings per share on $2.48 billion in revenue.
Analyst earnings estimates have been revised down 8.01% over the past 60 days and 14.02% over the past year, although the seven-day revision was slightly positive at 0.22%. The article notes that some of the longer-term reductions may reflect Pizza Hut’s departure from the business, while identifying Taco Bell’s recovery and KFC’s same-store sales as key indicators to watch. Consensus earnings per share for fiscal 2026 and 2027 are $6.45 and $7.03, respectively.
Yum! Brands shares were up 15.38% over one month and 12.68% over one year, according to the report. Its forward price-to-earnings ratio was 25.0, and the cited fair-value estimate implied 5.1% downside. The company’s use of the Pizza Hut proceeds for investment or share buybacks was also identified as a potential focus for investors.
Sources: Investing.com News.