LONDON, UK / ACCESSWIRE / October 6, 2016 / Active Wall St. announces its post-earnings coverage on Yum! Brands, Inc. (NYSE: YUM). The company reported its third quarter 2016 results on October 05th, 2016. The company delivered Q3 2016 operating profit growth of 11% and EPS growth, excluding special items, of 9%. However, earnings and sales numbers were below market expectations. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the quarter ended on September 3rd, 2016, Yum reported earnings of $622 million, or $1.56 a share, compared with $421 million, or $0.95 per share in the year ago. Adjusted for one-time items, the company posted earnings of $1.09 per share, compared with $1 a share a year ago, missing analysts' estimates by a penny.

Yum' sales in Q3 2016 reached $3.32 billion, down from $3.43 billion a year ago, Analysts polled by FactSet had expected the company to report adjusted earnings of $1.10 a share on sales of $3.49 billion, falling short of Wall Street's expected $3.49 billion in revenue.

Segment Review

Yum's KFC Division same-store sales increased 4%, with US same-store sales growing 6%, while system sales increased 7%. KFC Division opened 138 new international restaurants in 42 countries, including 96 units in emerging markets. At the same time, same store sales at the Taco Bell Division increased 3% and system sales increased 5%, while achieving a 21.7% restaurant margin, a decrease of 0.4 percentage points, driven by higher labor costs, partially offset by same-store sales growth and lower commodity costs. Taco Bell Division opened 63 new restaurants.

Worldwide core operating profit grew 11%, with the brand divisions excluding China delivering 11% core operating profit growth in aggregate, ahead of expectations. The company's China division system sales increased 3%, excluding foreign currency translation. Same-store sales decreased 1%, with declines of 1% at KFC and 4% at Pizza Hut Casual Dining. The decline was attributed to regional protests and negative sentiment toward several Western brands.

Balance Sheet

During Q3 2016, Yum recorded a tax benefit of $198 million in special items due to its ability to now realize tax benefits associated with previous impairment losses related to Little Sheep that were recognized as Special Items in 2013 and 2014.The company refranchised 94 units outside of China, more than half of which were Pizza Hut units, for proceeds of $61 million during the reported quarter and recorded refranchising gains of $21 million in Special Items. In order to complete its recapitalization strategy, Yum issued new debt worth $4.6 billion during Q3 2016.

Year-to-date through October 4th, 2016, the company has repurchased 54.5 million shares totaling $4.5 billion at an average price of $82 per share. The company expects to repurchase an additional $0.9 billion in shares before the end of 2016 to achieve its previously announced plan to return $6.2 billion of capital to shareholders (excluding dividends) in connection with the separation of our China business.

China Spinoff

In September, 2016, Yum announced that it will sell a part of its China operations to a prominent Chinese deal maker and the financial affiliate of Chinese internet giant Alibaba Group Holding Ltd., as it prepares for a spinoff of the China unit. Yum announced that it is on track to finalize China separation with Yum China Holdings, Inc. expected to begin trading on November 1, 2016, on the NYSE under the ticker symbol "YUMC."

Dividend

The board declared an increased dividend of $0.51 per share, payable on November 4, 2016, to shareholders of record as of the close of business on October 19, 2016. This dividend represents an 11% increase from the previous quarterly dividend of $0.46 per share.

Outlook

Yum raised its FY16 core operating profit growth forecast to a least 15% from at least 14%, and said its overall same-store sales rose 1%.

Stock Performance

On Wednesday, October 05, 2016, Yum! Brands' shares were down 1.84%, finishing the day at $88.62 with volume of 8.96 million shares exchanging hands by the close of the trading session, which was higher than the 3 months average volume of 2.97 million shares. The company's stock price advanced 5.68% in the last three months, 10.25% in the past six months, and 8.84% in the previous twelve months. Furthermore, since the start of the year, shares of the company have surged 23.47%. The stock is trading at a PE ratio of 26.70 and has a dividend yield of 2.30%.

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SOURCE: Active Wall Street