News about Yum Brands

A Cyclospora outbreak pushed Taco Bell's same-store sales down 4%, but its regular customers have already returned. KFC's U.S. business is now the bigger problem.

Yum Brands posted adjusted EPS of $1.56, beating the $1.49 expected, with revenue of $2.05 billion in line with forecasts. However, a cyclospora outbreak linked to iceberg lettuce cut Taco Bell U.S. same-store sales by 4% as diners temporarily pulled back, though CEO Chris Turner said the brand has outpaced the quick-service industry since late September. Excluding Pizza Hut, which Yum divested during the quarter (the China business sold to Yum China on Aug. 7 and the rest to LongRange Capital on Sept. 1), same-store sales were flat. KFC same-store sales rose 1% on growth in China and Europe, while U.S. system sales fell 6%.

Zacks highlights Palantir as its Bull of the Day with a Zacks Rank #1, citing U.S. commercial revenue up 149% and government revenue up 90% in Q2, plus FedRAMP High and DoD Impact Level 6 accreditations. The company has beaten Zacks Consensus Estimates for 15 straight quarters and gained more than 50% over the past three months, while many tech stocks fell 50% or more. Yum! Brands, named Bear of the Day with a Zacks Rank #5, franchises or operates more than 44,000 restaurants in 151 countries and territories, with KFC at 43.1% of revenue and Taco Bell at 37.7%. The article says Taco Bell was blamed for a food safety issue tied to a cyclosporiasis outbreak, and slower restaurant traffic afterward could significantly hurt earnings, since Taco Bell accounts for 43% of divisional operating profit excluding Pizza Hut.

The article compares Starbucks (SBUX), McDonald's (MCD) and Yum! Brands (YUM) over the past six months. SBUX closed at $90.75 (down 6.9%), MCD at $235.23 (down 22.8%) and YUM at $144.82 (down 10.3%), and none beat the two benchmarks. All three report negative book value, which the article attributes to years of buybacks and dividends funded with borrowing, while franchising explains much of the gap in returns. Yum Brands posted a 22.69% return on assets and 12.20% revenue growth, McDonald's had a 46.49% operating margin versus 12.92% at Starbucks, and Starbucks' revenue fell 1.40% with a payout above 140% of earnings. Starbucks trades at 29.04 times forward earnings, the highest of the three, and the author views McDonald's as the most defensible on the numbers.