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Yum China (YUMC) to Report Q4 Earnings: Here's What to Expect

Zacks Equity Research
·3 min read

Yum China Holdings, Inc. YUMC is scheduled to report fourth-quarter 2022 results on Feb 7, after market close.

In the last reported quarter, the company’s earnings outperformed the Zacks Consensus Estimate by 53.1% but sales missed the same by 0.2%. Earnings and sales increased 122.7% and 5% on a year-over-year basis, respectively.

Trend in Estimate Revision

The Zacks Consensus Estimate for revenues stand at $2.18 billion, indicating 4.7% year-over-year decline. Though earnings estimates for fourth-quarter 2022 have decreased to 14 cents from 16 cents over the past 30 days, the same suggests a 366.7% increase from the year-ago reported figure of 3 cents.

Factors to Consider

Yum China’s top line in the quarter is likely to have been driven by menu innovation, robust digitalization, loyalty programs, and digital and delivery capabilities. The company has been increasingly shifting toward digital and content marketing to expand its customer base. It has adopted a high-grade delivery strategy that includes collaborating with aggregators to source traffic and fulfills orders by the company’s KFC riders. This is anticipated to have aided the company in driving volume.

Digital orders during the third quarter, which accounted for 91% of KFC and Pizza Hut's company sales, are likely to have continued the robust performance during the fourth quarter. The company’s fourth-quarter results are likely to benefit from robust KFC and Pizza Hut loyalty programs and menu innovation approach.

Yum China Price and EPS Surprise

Yum China Price and EPS Surprise
Yum China Price and EPS Surprise

Yum China price-eps-surprise | Yum China Quote

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The Zacks Consensus Estimate for KFC revenues is currently pegged at $1,582 million, indicating a decline of 16.8%, from the prior-year quarter. Moreover, the consensus estimate for Pizza Hut revenues is pegged at $458 million, indicating a decline of 5.8% from the year-ago period.

However, higher costs and COVID-related restrictions are likely to negatively impact the company’s results. Yum China has been facing structurally high cost of labor and rentals. Apart from wage inflation, the company has been bearing additional costs stemming from promotion, packaging upgrades, menu innovation and technological novelty. These factors are likely to have hurt the margin in the quarter to be reported.

What Our Model Indicates

Our proven model predicts an earnings beat for Yum China this time around. That is because the stock has the combination of a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Earnings ESP for Yum China is +7.14%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Stocks Poised to Beat Earnings Estimates

Here are some stocks from the Zacks Retail - Restaurants space that investors may also consider as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

Yum! Brands, Inc. YUM currently has an Earnings ESP of +2.14% and a Zacks Rank #2.

Shares of Yum! Brands have gained 2.9% in the past year. YUM has a trailing four-quarter average negative earnings surprise of 3.7%.

Shake Shack Inc. SHAK has an Earnings ESP of +8.08% and a Zacks Rank #3.

Shares of Shake Shack have gained 21.5% in the past three months. SHAK has a trailing four-quarter average earnings surprise of 37.2%.

Domino's Pizza, Inc. DPZ has an Earnings ESP of +1.14% and a Zacks Rank #3.

Shares of Domino’s have gained 2.2% in the past three months. DPZ has a trailing four-quarter negative earnings surprise of 6.8%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Yum! Brands, Inc. (YUM) : Free Stock Analysis Report

Domino's Pizza Inc (DPZ) : Free Stock Analysis Report

Shake Shack, Inc. (SHAK) : Free Stock Analysis Report

Yum China (YUMC) : Free Stock Analysis Report

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Zacks Investment Research