What happened
Shares of Yum China Holdings Inc. (YUMC 0.34%) soared 53.2% in 2017, according to data from S&P Global Market Intelligence, as the Chinese fast-food giant consistently delivered solid results and expanded its presence in the nation of over 1.4 billion people.
Yum China's first big move came in early April, when shares climbed more than 25% on the heels of its better-than-expected first-quarter 2017 report. In that report -- and despite a particularly strong performance in the same year-ago period -- Yum China highlighted positive comparable-restaurant sales at both its Pizza Hut and KFC chains, while opening 133 new locations to bring its total to 7,600 at the end of February.
IMAGE SOURCE: YUM CHINA HOLDINGS.
So what
That's not to say Yum China's gains last year were uninterrupted. Shares dropped around 15% in early July even as the company posted solid 4% comps growth in the second quarter. At the time, investors were more concerned when quarterly earnings of $0.27 per share fell slightly below consensus expectations. But considering shares were still up more than 30% year to date after the drop, as well as management's assertion that it was "pleased" with their performance, it seemed the move was primarily the result of short-term traders taking profits.
To be sure, Yum China had all but recovered from its pullback by the time it released third-quarter results in early October. Shares climbed around 5% as it announced that quarterly comps growth had accelerated to a better-than-expected 6%. Yum also added another 129 restaurants during the quarter, remaining on track to meet its goal of 550 to 600 new locations for all of 2017. In addition, Yum China not only initiated a new dividend at $0.10 per share, but also indicated it would likely increase the payout going forward. Finally, Yum China boosted its stock repurchase authorization by $250 million, bringing its total authorization to $550 million.
Now what
Subsequent to the end of the year, Yum China estimated that it would need to recognize a one-time expense of $160 million in its fiscal fourth quarter related to repatriation tax and revaluation of deferred tax assets -- both stemming from recent U.S. tax reform efforts. But the news came as little surprise to most investors and industry watchers, and shares were little changed in response.
As it stands, Yum China is set to release its final fiscal Q4 2017 results in early February. And the bar doesn't appear to be set particularly high with consensus estimates calling for earnings per share to remain roughly flat at $0.17 and for revenue to increase around 8.4% to $2.14 billion.
Given Yum China's incredibly popular core brands, steady location growth, and new capital returns initiatives, it seems investors may be willing to continue embracing the company regardless of whether it meets those estimates.
