Yum! Brands (YUM) Up 2.9% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Yum! Brands, Inc. YUM. Shares have added about 2.9% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is YUM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Yum! Brands Q1 Earnings & Revenues Surpass Estimates

Yum! Brands delivered better-than-expected results for first-quarter 2018. Adjusted earnings of 90 cents per share surpassed the Zacks Consensus Estimate of 68 cents. Further, earnings surged 38% year over year. The shift to refranchising substantially bolstered the company’s operating margin and earnings per share. Further, the trend is expected to continue.

Total revenues of $1,371 million were down 3% year over year but surpassed the Zacks Consensus Estimate of $1,082 million. The decline in total revenues was mainly due to decrease in company sales as an impact of its continued strategic refranchising initiative.

Segmental Performance

Yum! Brands reports under three segments — KFC, Pizza Hut and Taco Bell.

KFC revenues were $658 million, down 10% on a year-over-year basis. Comps at the KFC division dipped 2% compared with the year-ago quarter’s rise of 2% and the previous quarter’s increase of 3%.

Segment operating margin was up 5.3% to 33.6% year over year owing to refranchising and same-store sales growth.

At Pizza Hut, revenues were $251 million, up 8% on a year-over-year basis. Comps were up 1% against the year-ago quarter’s decline of 3% and preceding quarter’s increase of 1%. Segment operating margin was down 0.6% year over year to 35%.

Taco Bell revenues were $462 million, up 2% from the year-ago quarter. Comps were up 1%, which compared unfavorably with the year-ago quarter growth of 8%. Segment operating margin was down 2.7% to 28.5% year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to six lower.

Yum! Brands, Inc. Price and Consensus

Yum! Brands, Inc. Price and Consensus | Yum! Brands, Inc. Quote

VGM Scores

At this time, YUM has an average Growth Score of C, however its Momentum is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Notably, YUM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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