The Market Takes a Bite Out of Yum! Brands After Lackluster Earnings

Shares of Yum! Brands (NYSE: YUM  ) fell more than 2% in after-hours trading on Wednesday after the company reported lackluster results for its fiscal 2014 second quarter. For the period ended June 14, Yum! Brands posted a profit of $0.73 per share, up 30% from the same period a year ago. Unfortunately, it wasn't enough to impress analysts, who expected earnings per share of $0.74 in the quarter. The company's revenue climbed 10% to $3.2 billion, which was inline with analyst expectations.

Strong growth in China was a positive, with same-store sales in Yum!'s China division growing 15% in the quarter. However, this was slightly offset by underwhelming comparable sales from the company's Pizza Hut and Taco Bell chains. Yum! Brands, the parent company of those two restaurants plus KFC, said same-store sales for its Pizza Hut brand declined 3% in the quarter. Meanwhile, the company posted a meager 2% comps growth for its Taco Bell business, which was below the 3.6% analysts were expecting.

China is an especially important market for Yum!, as it currently accounts for nearly half of Yum! Brands' total revenues. Operating profit surged 188% in China, driven by strong sales and margin performance. As a result, management said it's on track to open as many as 700 new restaurants in China in the quarters to come.

The stock was trading down more than 2% at $82 a share as of 5:30 p.m. ET on the news.

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Tamara Rutter

I've been an analytical writer for The Motley Fool since 2011. I cover the sectors of Consumer Goods, Technology, and Industrials. Connect with me on Twitter using the handle, @TamaraRutter -- I'd love to hear from you!

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9/3/2015 11:04 AM
YUM $80.78 Up +0.51 +0.64%
Yum! Brands CAPS Rating: ****