Pizza Hut Parent Stock Gains On Strong Q2 Earnings, Solid Same-Store Sales Growth

Yum! Brands Inc (NYSE: YUM) reported second-quarter FY21 sales growth of 34% year-on-year, to $1.60 billion, beating the analyst consensus of $1.48 billion. 

Comps: Same-store sales for the quarter grew 23%. It reported a 2% unit growth Y/Y. On a 2-year basis, same-store sales at KFC U.S. grew 19%, and Pizza Hut U.S. rose 9%.

Worldwide system sales excluding foreign currency translation grew 26%, with KFC at 35%, Taco Bell at 24%, and Pizza Hut at 10%.

Earnings: YUM sales rose 29% Y/Y to $520 million, and Franchise and property revenues increased 35% to $706 million. Total costs and expenses declined 15.3% Y/Y to $1.03 billion.

The operating margin was 35.4%, and operating income for the quarter rose 89% to $567 million.

YUM's net cash from operating activities in Q2 rose 113.5% Y/Y to $773 million. It held $834 million in cash and equivalents as of June 30, 2021.

Adjusted EPS of $1.16 beat the analyst consensus of $0.95.

"I'm proud that each of our divisions reported positive same-store sales growth on a 2-year basis, a step up from first-quarter trends. This sustained momentum was underpinned by our investments in digital and off-premise and the agility of our brands to meet the needs of consumers in an ever-changing environment," said CEO David Gibbs.

Outlook: Yum! Brands reinstated its long-term growth algorithm and revised the unit growth component of this algorithm from 4% unit growth to 4% - 5% unit growth.

Analyst Rating: On July 27, 2021, Guggenheim analyst Gregory Francfort initiated coverage on Yum Brands with a Buy rating and announced a Price Target of $135.

Price action: YUM shares are trading higher by 5.00% at $128.735 on the last check Thursday.

Photo by M.O. Stevens via Wikimedia