However, the ongoing refranchising efforts can take a toll
on the top line numbers. Although the refranchising could hurt revenue growth,
it will prove beneficial to margins and profitability. On the flip side, lower
revenues and a higher tax rate could put pressure on earnings.
In the first quarter of 2019, Yum topped earnings expectations while revenues were in line with estimates. Revenues dropped 9% to $1.25 billion while adjusted EPS fell 8% to $0.82. Same-store sales grew 4%.
Worldwide system sales grew 8%. Revenues declined across all
the company’s divisions – KFC, Pizza Hut and Taco Bell. For the full year of
2019, Yum expects adjusted EPS of at least $3.75.
Yum! Brands’ shares have gained 23% so far this year and 8% in the past three months. The majority of analysts covering the stock have given it a Hold rating and the average 12-month price target is $108.