Yum! Shares Mushroom On Profits

The fast-food restaurant operator , Yum! Brands Inc. (NYSE: YUM) mentioned 4th-quarter and full-year 2013 results after markets closed on Monday. For the full year Yum! announced EPS of $2.97 on revenues of $13.08 billion compared with EPS of $3.25 on revenues of $13.63 billion in 2012. The consensus estimate called for EPS of $2.91 on revenues of $13.16 billion.

The company’s CEO said “With the decisive actions we’ve taken to strengthen our company across the board, we are well positioned to deliver double-digit EPS growth in 2014 and the years ahead.”

In the U.S., Yum’s 4th quarter same-store sales dropped 2% in the 4th quarter but were flat for the full year. Restaurant margins were down 0.3% in the quarter but up 0.6% for the year.

The firm posted adjusted diluted earnings per share (EPS) of $0.86 and revenues of $4.18 billion. In the 4th quarter of 2012, Yum! conveyed EPS of $0.83 on revenues of $4.15 billion. Thomson Reuters had estimates for EPS of $0.80 and $4.26 billion in revenue.

The news on same-store sales belies somewhat the positive earnings beat. Same-store sales at the company’s 4,563 KFC outlets in China plunged 4% for the quarter and 15% for the full year. An issue regarding the company’s poultry supply in late 2012 carried over all of 2013.

In the 3rd quarter, Yum! also took a $258 million impairment charge against its Little Sheep restaurants in China even though the company mentioned there was never a problem with the quality of the food at these stores. A company spokesman noted Reuters Monday afternoon that a recent outbreak of bird flu in China has had no impact on Yum’s sales.

Same-store sales in the international division’s emerging markets escalated by 3% for the quarter and 4% for the year. Sales in developed markets were flat for the year and up 1% in the quarter. To make good on the promise to escalate earnings by double-digit percentages again, Yum! will need once and for all to overcome the loss of sales in China and do something to boost U.S. sales.

Yum’s stock is trading up about 4.3% at $69.02 after closing at $66.16. The 52-week range is $59.68 to $78.68.

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