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Why Yum China Holdings Inc. Stock Plunged Today

By Steve Symington – Updated Jul 6, 2017 at 4:10PM

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The China-centric fast-food leader's strong earnings growth just wasn't strong enough.


Shares of Yum China Holdings Inc. (YUMC -3.37%) were down 15.7% as of 3:15 p.m. EDT Thursday after the company announced underwhelming second-quarter 2017 results.

So what

Quarterly revenue climbed only slightly on a year-over-year basis to just above $1.59 billion, including 4% same-store sales growth at KFC and flat comps at Pizza Hut. To be fair, revenue would have increased 7% had it not been for the impact of foreign currency exchange, bolstered by contributions from new locations opened over the past year.

On the bottom line, Yum China Holdings' net income climbed 39% to $107 million, and diluted earnings per share rose 29% to $0.27. But analysts, on average, were expecting even higher earnings of $0.29 per share.

KFC Restaurant in China


Nonetheless, Yum China Holdings CEO Micky Pant insisted he was "pleased" with the company's performance, adding, "We are making progress in the key themes we are investing in -- loyalty programs, digital and delivery capabilities, and continued upgrades of restaurant assets and optimization of store formats."

Now what

We should also note that shares are still up nearly 30% so far in 2017, including a more than 25% rise in April alone following Yum China's better-than-expected first-quarter report. So, in the end, while Yum China Holdings' long-term story remains intact, it's hardly surprising to see investors taking some of their gains off of the table today.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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