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Yum China Holdings (YUMC) Beats Second-Quarter Earnings Estimates


Yum China Holdings (NYSE:YUMC) came out with quarterly earnings of $0.42 per share, beating the Zacks Consensus Estimate of $0.37 per share. This compares to earnings of $0.36 per share a year ago. These figures are adjusted for non-recurring items.

Yum China Holdings (YUMC) Beats Second-Quarter Earnings Estimates
Source: Shutterstock

This quarterly report represents an earnings surprise of 13.51%. A quarter ago, it was expected that this restaurant operator in China would post earnings of $0.53 per share when it actually produced earnings of $0.59, delivering a surprise of 11.32%.

Over the last four quarters, the company has surpassed consensus EPS estimates four times.

Yum China, which belongs to the Zacks Retail – Restaurants industry, posted revenues of $2.12 billion for the quarter ended June 2019, missing the Zacks Consensus Estimate by 2.44%. This compares to year-ago revenues of $2.07 billion. The company has topped consensus revenue estimates just once over the last four quarters.

The sustainability of the stock’s immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management’s commentary on the earnings call.

Yum China shares have added about 35.5% in equity value since the beginning of the year versus the S&P 500’s gain of 20.5%.

What’s Next for Yum China?

While Yum China has outperformed the market so far this year, the question that comes to investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable measure that can help investors address this is the company’s earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately.

Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Ahead of this earnings release, the estimate revisions trend for Yum China was mixed. While the magnitude and direction of estimate revisions could change following the company’s just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.55 on $2.44 billion in revenues for the coming quarter and $1.67 on $8.92 billion in revenues for the current fiscal year.

Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Retail – Restaurants is currently in the top 31% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

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Article printed from InvestorPlace Media, https://investorplace.com/2019/08/yum-china-holdings-yumc-beats-second-quarter-earnings-estimates/.

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