Yum Brands (NYSE:YUM) earnings release for the 1st quarter of their 2020 fiscal year
Category: Stock Market and Yum Brands
Date: 30 April 2020 Stock Price: $87.46 We take a look at the 1st quarter earnings report of their 2020 fiscal year of Yum! Brands, the owner of KFC, Pizza Hut and Taco Bell. The group's results have been impacted by the Coronavirus pandemic. In fact the CEO said towards the end of the quarter they were "heavily" impacted.
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About Yum Brands
Yum! Brands, Inc., based in Louisville, Kentucky, has over 48,000 restaurants in more than 145 countries and territories primarily operating the company’s brands -- KFC, Pizza Hut and Taco Bell -- global leaders of the chicken, pizza and Mexican-style food categories. Worldwide, the Yum! Brands system opens over eight new restaurants per day on average, making it a leader in global retail development. In 2018, Yum! Brands was named to the Dow Jones Sustainability North America Index and ranked among the top 100 Best Corporate Citizens by Corporate Responsibility Magazine. In 2019, Yum! Brands was named to the Bloomberg Gender-Equality Index for the second consecutive year.
Financial overview of Yum Brands' 1st quarter 2020 earnings report
The numbers we are interested in (for the quarter):
Contribution of Yum! Brands different brands to total revenue for the 3rd quarter of 2019:
- Total revenues: $1.263 billion (up $1.254 billion for the same quarter of the previous year)
- Total revenues increased by 1% over the last 12 months
- Total costs and expenses, net: $1.13 billion (up from $821 million for the same quarter of the previous year)
- Total costs and expenses increased by 23% over the last 12 months
- Net Income: $83million (down from $262 million for the same quarter of the previous year)
- Diluted earnings per share: $ 0.27 (down 68% from $0.85 for the same quarter of the previous year)
- PE ratio of Yum Brands: 94
- Average number of shares outstanding: 307 million (down 2% from 315 million for the same quarter of the previous year)
- Dividends declared per common share: $ 0.47 (up from $0.42 for the same quarter of the previous year)
- Dividend yield of Yum Brands: 2.2%
- Cash and cash equivalents: $1.154 billion
- Cash and cash equivalents per share: $3.75 per share
- Cash and cash equivalents makes up 4.2% of Yum Brands' total market capital
- Cash and cash equivalents makes up 18.9% of Yum Brands' total assets
- Accounts and notes receivable: $511 million
- Accounts and notes receivable makes up 8.4% of the Yum Brands' total assets
- Cash generated from operations : $238 million
- Cash generated from operations per share: $0.775
Contribution of Yum! Brands different brands to total revenue for the 3rd quarter of 2019:
- KFC: $556 million (45.4% of Yum! brands total revenue)
- Pizza Hut: $235 million (19.2% of Yum! brands total revenue)
- Taco Bell: $453 million (35.4% of Yum! brands total revenue)
YUM's management commentary on their 1st quarter 2020 earnings
Louisville, KY (April 29, 2020) - Yum! Brands, Inc. (NYSE: YUM) today reported results for the first-quarter ended March 31, 2020. Worldwide system sales excluding foreign currency translation declined (3)%, with 4% net-new units and (7)% same-store sales decline. Firstquarter GAAP EPS was $0.27, a decrease of (68)%. First-quarter EPS excluding Special Items was $0.64, a decrease of (23)%
David Gibbs, CEO, said “First-quarter results reflect two different realities. We began the year with momentum across many of our businesses, however as the quarter progressed we were heavily impacted by the unfortunate spread of COVID-19. Around the world, we took extraordinary measures to protect the health and safety of our employees, customers, franchisees and restaurant team members. We partnered with our franchise operators on our shared mission during this global crisis to provide affordable, convenient food in a safe, low contact environment with drive-thru, curbside carryout, and contactless delivery all enabled by our digital capability. As a result, our restaurants around the world remain largely open for business, serving customers and supporting frontline workers and other essential workers in our communities. I’m tremendously proud of all those executing across our company and franchise system and am encouraged by the second-quarter sales trends of many of our businesses in Asia and in the U.S. Over the previous three years, we transformed Yum! to be a stronger company for its stakeholders and believe we are well positioned to weather this unprecedented crisis owing to the strength of our system-wide talent, operating capabilities, global best practices, and our healthy balance sheet and liquidity position.”
David Gibbs, CEO, said “First-quarter results reflect two different realities. We began the year with momentum across many of our businesses, however as the quarter progressed we were heavily impacted by the unfortunate spread of COVID-19. Around the world, we took extraordinary measures to protect the health and safety of our employees, customers, franchisees and restaurant team members. We partnered with our franchise operators on our shared mission during this global crisis to provide affordable, convenient food in a safe, low contact environment with drive-thru, curbside carryout, and contactless delivery all enabled by our digital capability. As a result, our restaurants around the world remain largely open for business, serving customers and supporting frontline workers and other essential workers in our communities. I’m tremendously proud of all those executing across our company and franchise system and am encouraged by the second-quarter sales trends of many of our businesses in Asia and in the U.S. Over the previous three years, we transformed Yum! to be a stronger company for its stakeholders and believe we are well positioned to weather this unprecedented crisis owing to the strength of our system-wide talent, operating capabilities, global best practices, and our healthy balance sheet and liquidity position.”
Disclosures pertaining to outstanding debt in our Restricted Group capital structure will be provided at the time of the filing of the first-quarter Form 10-Q.
- On March 18, 2020 we acquired The Habit Restaurants, Inc. (“Habit”) for total cash consideration of $408 million, net of cash acquired. We have reflected the ongoing results of Habit’s operations from March 18, 2020 through March 31, 2020 in our financial statements for the quarter ended March 31, 2020. These ongoing results had an insignificant impact on our Core Operating Profit and EPS before Special Items. Additionally, we have included the system sales of Habit for the period from March 18, 2020 through March 31, 2020 in our consolidated system sales and reflected the Habit’s same-store sales results for this same period in our consolidated same-store sales results for the quarter ended March 31, 2020. Neither our consolidated system sales growth nor our same-store sales results were significantly impacted by the inclusion of Habit.
- For the first-quarter and for informational purposes only, Habit had a same-store sales decline of 9% for the period January 1, 2020 through March 31, 2020.
- As a result of the impacts of the COVID-19 pandemic on Habit’s results through March 31, 2020 as well as general market conditions, we have recorded an after-tax impairment charge related to the goodwill arising from the preliminary purchase price allocation associated with our Habit acquisition of $107 million. We have reflected this impairment as a Special Item, resulting in a Special Item EPS charge of approximately $0.35.
- On March 24, 2020, we borrowed $525 million under the Revolving Facility as a precautionary measure in order to preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic. This borrowing, together with $425 million borrowed under the Revolving Facility on March 18, 2020 to fund amounts associated with the acquisition of Habit, resulted in an aggregate of $950 million outstanding under the Revolving Facility as of March 31, 2020.
- On March 24, 2020, we announced a suspension of our previously announced share repurchase program, pursuant to which the Board of Directors authorized repurchases up to $2 billion of common stock through June 30, 2021.
- On April 1, 2020, subsequent to the end of our first-quarter, we issued $600 million of Senior Unsecured Notes. Proceeds from the Notes offering will be used to pay the fees and expenses of the offering and for general corporate purposes.
YUM! Brands (NYSE: YUM) stock price history
The image below, obtained from Google shows the stock price history of Yum! brands over the last 5 years, and it's been a pretty good time for Yum brands stockholders. 5 years ago the stock of Yum brands was trading at $66 and its currently trading at $87.46. That's a return of 32.5% provided to Yum brands over the last 5 years.
Yum brands stock is trading at close to the mid point between its 52 week high and 52 week low, which to us is an indication that the short term sentiment and momentum of Yum brands stock is neutral at this point in time.
Yum brands stock is trading at close to the mid point between its 52 week high and 52 week low, which to us is an indication that the short term sentiment and momentum of Yum brands stock is neutral at this point in time.
Recent search trends for Yum Brands stock price
The graphic below shows the trend in Yum stock price searches in the US over the last 12 months as obtained from Google Trends. There was a significant spike in searches for Yum stock prices towards the end of March 2020, which coincides with a significant decline in the stock price of Yum
Recent coverage of Yum Brands
The extract below discusses Yum brands 1st quarter 2020 earnings report as obtained from TheStreet.com
Yum Brands (YUM) missed Wall Street's first-quarter earnings expectations Wednesday after the owner of the Taco Bell, KFC, Pizza Hut restaurant chains saw the coronavirus pandemic carve into profits. Shares were down nearly 1% to $87.50. The Louisville, Kentucky-based company reported net income of $83 million, or 27 cents a share, down from $262 million, or 83 cents, a year earlier. Adjusted earnings came to 64 cents a share, falling short of FactSet's consensus of 67 cents.
Restaurants have shut their dining areas and switched to delivery and take-out ordering in response to social distancing requirements. In March, the company acquired the Habit Restaurants and as a result of the impacts of the coronavirus pandemic on Habit’s results through March 31, as well as general market conditions, Yum recorded a $107 million after-tax impairment charge, reflected as a special item of roughly 35 cents a share.
Revenue totaled $1.26 billion, up slightly from $1.25 billion a year ago, and edged out analysts' calls for $1.22 billion. Same-stores sales fell 7% compared with consensus for a 6.8% drop. KFC was down 8%, Pizza Hut slipped 11% and Taco Bell same-store sales rose 1%. Yum operates about 50,000 restaurants globally.
"First-quarter results reflect two different realities," CEO David Gibbs said in a statement. "We began the year with momentum across many of our businesses, however as the quarter progressed we were heavily impacted by the unfortunate spread of COVID-19."
Read the full article here
Yum Brands (YUM) missed Wall Street's first-quarter earnings expectations Wednesday after the owner of the Taco Bell, KFC, Pizza Hut restaurant chains saw the coronavirus pandemic carve into profits. Shares were down nearly 1% to $87.50. The Louisville, Kentucky-based company reported net income of $83 million, or 27 cents a share, down from $262 million, or 83 cents, a year earlier. Adjusted earnings came to 64 cents a share, falling short of FactSet's consensus of 67 cents.
Restaurants have shut their dining areas and switched to delivery and take-out ordering in response to social distancing requirements. In March, the company acquired the Habit Restaurants and as a result of the impacts of the coronavirus pandemic on Habit’s results through March 31, as well as general market conditions, Yum recorded a $107 million after-tax impairment charge, reflected as a special item of roughly 35 cents a share.
Revenue totaled $1.26 billion, up slightly from $1.25 billion a year ago, and edged out analysts' calls for $1.22 billion. Same-stores sales fell 7% compared with consensus for a 6.8% drop. KFC was down 8%, Pizza Hut slipped 11% and Taco Bell same-store sales rose 1%. Yum operates about 50,000 restaurants globally.
"First-quarter results reflect two different realities," CEO David Gibbs said in a statement. "We began the year with momentum across many of our businesses, however as the quarter progressed we were heavily impacted by the unfortunate spread of COVID-19."
Read the full article here
Yum! Brands (NYSE: YUM) latest stock valuation
So what do we value Yum! Brands stock at after the release of their 3rd quarter 2019 earnings release. Based on Yum brands' latest earnings report and the earnings guidance provided our stock valuation models provides a target price (full value price) from Yum! brands at $78.40 a share (down slightly from our last Yum Brands Valuation). We therefore believe the stock of Yum Brands is overvalued.
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $78.40. Therefore we believe a good entry point into Yum brands' stock is at $70.60 or below. We expect the stock of Yum brands' to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
Since the stock of Yum Brands is trading at well above our target (full value) price and our suggested entry price we rate Yum Brands as a sell
We usually suggest that long term and fundamental investors get in at least 10% below our target (full value) price which in this case is $78.40. Therefore we believe a good entry point into Yum brands' stock is at $70.60 or below. We expect the stock of Yum brands' to pull back from current levels to levels closer to our target price (full value price) in coming weeks and moths as we believe it is overvalued at this point in time.
Since the stock of Yum Brands is trading at well above our target (full value) price and our suggested entry price we rate Yum Brands as a sell
Next earnings release of Yum Brands!
It is expected that Yum Brands will release their 2nd quarter 2020 earnings report in late July 2020