YUM! Brands Inc. Earnings: Powering Ahead

S&P 500 (NYSE:SPY) component YUM! Brands Inc. (NYSE:YUM) reported its results for the fourth quarter. Yum Brands develops, operates, franchises and licenses a system of restaurants.

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YUM! Brands Earnings Cheat Sheet for the Fourth Quarter

Results: Net income for YUM! Brands Inc. rose to $356 million (75 cents per share) vs. $274 million (56 cents per share) in the same quarter a year earlier. This marks a rise of 29.9% from the year earlier quarter.

Revenue: Rose 15.4% to $4.11 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: YUM! Brands Inc. beat the mean analyst estimate of 74 cents per share. Analysts were expecting revenue of $4.03 billion.

Quoting Management: David C. Novak, Chairman and CEO said, “I’m pleased to report full-year EPS growth of 14%, making 2011 the tenth consecutive year we exceeded our annual target of at least 10%. The highlight of 2011 was again the exceptional performance of our China business, which grew system sales by 29% and operating profit by 15%, prior to foreign currency translation. We opened a record 656 new restaurants and delivered extraordinary same-store sales growth of 19%. Clearly, our KFC and Pizza Hut brands in China continued to strengthen their category-leading positions. At the same time, Yum! Restaurants International opened 905 new units, including 622 in high-growth emerging markets. We are on the ground floor of growth in India, Russia and Africa, where system sales grew at strong double-digit rates. For the year, our emerging market businesses at Yum! Restaurants International grew system sales 13%, prior to foreign currency translation, including new-unit growth of 7%. Emerging markets contributed nearly 50% of operating profit at Yum! Restaurants International. The Yum! growth story is clearly about China and a whole lot more.”

Key Stats:

The company has now seen net income rise in three straight quarters. In the third quarter, net income rose 7.3% and in the second quarter, the figure rose 10.5%.

Gross margin shrank 1.2 percentage points to 26%. The contraction appeared to be driven by increased costs, which rose 17.4% from the year earlier quarter while revenue rose 15.4%.

Revenue has risen the past four quarters. Revenue increased 14.4% to $3.27 billion in the third quarter. The figure rose 9.4% in the second quarter from the year earlier and climbed 3.4% in the first quarter from the year-ago quarter.

The company has now topped analyst estimates for the last three quarters. It beat the mark by one cent in the third quarter and by 5 cents in the second quarter.

Looking Forward: The outlook for the company’s next quarter performance is unfavorable. Estimates have gone down from an average 71 cents per share to 70 cents over the past seven days. At $2.86 per share, the average estimate for the fiscal year has risen from $2.85 sixty days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com