I have seen the three-headed monster Yum! Brands
As the second-largest fast-food chain behind McDonald's
System restaurants in operation at the end of the quarter increased 27% in China, 8% in Pizza Hut South Korea, 7% in the U.K., and 6% in Mexico. Franchise-only businesses experienced 6% growth, with Asia, southern Africa, the Middle East, and the Caribbean/Latin America being key contributors. In the U.S., 129 multibrand stores were added in the third quarter (with nearly 2,500 currently in operation), which added up to impressive year-over-year growth of 23%.
Blended same-store sales at the company's restaurants in September were up 3%, bolstered by 4% and 6% growth at Taco Bell and Pizza Hut, respectively, which made up for a 1% drop at KFC. Yum! has also raised its full-year 2004 earnings guidance to $2.35 per share (before special items), a cent better than the previous earnings expectation (on same-store sales growth in the 3% to 4% range).
Looking forward to 2005, Yum! CEO David Novak said that, "we are confident of continuing to deliver our stated goal of at least 10% growth in EPS." The company expects to reach this goal by opening at least 1,000 new international restaurants and growing U.S. same-stores sales in the range of 1% to 2%.
Yum! has effectively fought rising commodity prices with tremendous cost controls. With companies like Wendy's
The company has generated nearly $800 million of cash flow so far this year, but has utilized only $421 million as part of its capital spending plan. The Yum! shares, which are trading at 16 times the 2005 earnings estimate of $2.60 per share, appear to be fully valued relative to its 11% growth rate, but gain additional strength with its new 0.96% dividend yield.
Grab some yummy food and a few napkins while chewing on these takes:
Fool contributor Phil Wohl spent more than 12 years on Wall Street and has been known to chomp on a taco or a slice of pizza when the mood hits. He does not own shares of any of the companies mentioned.