What to Expect From Yum Brands Earnings

Yum! Brands Inc. (NYSE: YUM) is scheduled to release its second-quarter financial results after the markets close on Wednesday. The consensus estimates from Thomson Reuters call for $0.74 in earnings per share (EPS) on $3.07 billion in revenue. In the same period of last year, the company posted EPS of $0.69 and $3.10 billion in revenue.

As far as Asian operations are concerned, few companies have drawn as much financial media attention as Yum Brands. The company, which operates KFC, Pizza Hut and Taco Bell brands globally, is putting into motion a plan to spin off its Asian operations as a separate entity. Ahead of the spin-off, data suggests that sales growth is picking up, with the latest figures from the first quarter suggesting a 12% increase in same-store sales since last year. The spin-off is expected to complete before the end of 2016, so Yum shareholders have an opportunity here to own both companies before then.

Recently, the board of directors authorized a repurchase program up to $4.2 billion in additional shares of common stock, while also announcing a quarterly dividend of $0.46 per share. The additional share repurchases are part of the company’s previously announced commitment to returning $6.2 billion of capital to shareholders prior to the planned separation of its China business, which is on track to be completed by the end of 2016. The capital will be returned in the form of share repurchases, a special dividend or a combination of the two.

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A few analysts weighed in on Yum prior to the release of the earnings report:

• Wells Fargo reiterated a Hold rating with an $83 price target.
• Oppenheimer reiterated a Buy rating.
• Royal Bank of Canada reiterated a Buy rating.
• Deutsche Bank reiterated a Hold rating with an $83 price target.
• Nomura reiterated a Buy rating with a $95 price target.
• Credit Suisse reiterated a Hold rating.
• Sanford Bernstein reiterated an Outperform rating.
• Baird reiterated a Hold rating.

So far in 2016, the stock has outperformed the broad markets, up about 20%. Over the past 52 weeks, it is actually down about 3%.

Shares of Yum were trading at $86.43 on Tuesday, with a consensus analyst price target of $87.05 and a 52-week trading range of $64.58 to $92.33.

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