Yum China Holdings, Inc. YUMC reported third-quarter 2024 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same.  The top and bottom lines increased on a year-over-year basis.

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Following the results, shares of the company gained 7.2% during trading hours on Nov. 4. Positive investor sentiments were witnessed as the company emphasized its commitment to returning capital to its shareholders while sustaining growth investments. Confident in its cash-generating abilities, the company plans to increase capital returns to shareholders from $3 billion to $4.5 billion between 2024 and 2026.

YUMC’s Q3 Earnings & Revenue Discussion

Yum China reported adjusted earnings per share (EPS) of 77 cents, which beat the Zacks Consensus Estimate of 68 cents by 13.2%. The bottom line moved up 30.5% year over year.

Total revenues of $3.07 billion missed the consensus mark of $3.08 billion. However, the top line inched up 5.4% on a year-over-year basis. Excluding foreign currency translation, revenues increased 4% year over year.

Yum China Price, Consensus and EPS Surprise

Yum China price-consensus-eps-surprise-chart | Yum China Quote

Total system sales (excluding foreign currency translation) increased 4% year over year. The upside was attributable to the net new unit contribution of 7%. System sales at KFC and Pizza Hut increased 6% and 2% (excluding foreign currency translation) year over year, respectively.

During the quarter, YUMC's same-store sales reached 97% of the previous year's level and same-store transactions grew 1% on a year-over-year basis.

Operating Highlights

During the third quarter, total costs and expenses amounted to $2.7 billion compared with $2.59 billion reported in the prior-year quarter. We projected the metric at $2.73 billion.

The restaurant margin was 17% flat year over year. We estimated the metric at 18.4%.

Adjusted operating profit totaled $371 million compared with $327 million a year ago. Our estimate for the metric was $332 million.

Adjusted net income amounted to $297 million compared with $248 million reported in the prior-year quarter. Our estimate for the metric was $249.4 million.

Balance Sheet

As of Sept. 30, 2024, Yum China’s cash and cash equivalents were $1.19 billion compared with $1.13 billion as of Dec. 31, 2023. Net inventories were $359 million compared with $424 million as of Dec. 31, 2023.

As part of this expanded capital returns initiative, the company aims to return $1.5 billion to shareholders in 2024. During the first nine months, it delivered a record $1.24 billion in returns, including $1.06 billion through share buybacks and $187 million in cash dividends.

In November 2024, Yum China’s board of directors approved an additional $1 billion for share repurchases, increasing total authorization to $4.4 billion. From 2017 to Nov. 1, 2024, YUMC repurchased around 71.8 million shares for $3 billion, leaving approximately $1.4 billion in remaining authorization.

Management declared a quarterly cash dividend of 16 cents per common share. The dividend will be payable on Dec. 17 to shareholders of record as of the close of business on Nov. 26, 2024.

Unit Development and Other Updates

In the third quarter, Yum China opened 438 net new stores. As of Sept. 30, the total restaurant count reached 15,861, including 11,283 KFC stores and 3,606 Pizza Hut stores.

The company reported strategic expansion into underserved markets across China, enhancing customer access through tailored store models. Yum China is accelerating franchise store openings, focusing on strategic and remote locations, including lower-tier cities previously beyond reach. The company expects the franchise mix of net new stores to gradually increase to 40-50% for KFC and 20-30% for Pizza Hut over the next few years.

Yum China’s delivery contributed approximately 40% to KFC and Pizza Hut's company sales.

Digital orders contributed about 90% to the total company sales. Loyalty programs of KFC and Pizza Hut led to year-over-year growth by increasing to more than 510 million members.

2024 Outlook

Yum China still projects net new store openings to be in the range of 1,500-1,700. Management continues to project capital expenditures to be between $700 million and $850 million.

YUMC’s Zacks Rank

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

Recent Retail-Wholesale Releases

Chipotle Mexican Grill, Inc. CMG reported mixed third-quarter 2024 results, with earnings beating the Zacks Consensus Estimate for the seventh consecutive quarter but revenues missing the same after beating in the preceding four quarters.

CMG reported adjusted EPS of 27 cents, outpacing the Zacks Consensus Estimate of 25 cents. The bottom line increased 17.4% from 23 cents reported in the year-ago quarter. Quarterly revenues of $2,793.6 million missed the consensus mark of $2,817 million. However, the top line rose 13% on a year-over-year basis. This upside was driven by strong comparable restaurant sales growth, backed by higher transactions of 3.3% as well as a 2.7% rise in average checks.

Shake Shack Inc. SHAK posted third-quarter fiscal 2024 results, wherein earnings and revenues beat the Zacks Consensus Estimate. Both top and bottom lines also increased on a year-over-year basis. The company ramped up its investment in marketing strategies and programs aimed at increasing guest engagement and brand awareness, even amid a challenging market environment. These efforts have paid off, as the company has achieved some of the highest brand awareness levels on record, which, in turn, is fueling robust sales and profitability growth.

SHAK’s fiscal third-quarter adjusted EPS came in at 25 cents, which beat the Zacks Consensus Estimate of 20 cents. In the prior-year quarter, the company reported adjusted EPS of 17 cents. Quarterly revenues of $316.9 million beat the consensus mark of $315 million. The top line increased 14.7% on a year-over-year basis.

BJ's Restaurants, Inc. BJRI reported third-quarter fiscal 2024 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. Both top and bottom lines increased on a year-over-year basis.

The company reported an adjusted loss per share of 13 cents, missing the Zacks Consensus Estimate of 3 cents. In the year-ago quarter, it recorded an adjusted loss per share of 16 cents. Total revenues of $325.7 million beat the consensus mark by 0.04%. The top line inched up 2.2% year over year. This upside was backed by strong guest traffic and Pizookie Meal Deal performance.

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