Factors Setting the Tone for YUM! Brands Q1 Earnings

YUM! Brands, Inc. YUM is scheduled to report first-quarter 2024 results on May 1, before the opening bell. In the last reported quarter, the company's bottom line missed the Zacks Consensus Estimate by 9.4%.

Q1 Estimates

The Zacks Consensus Estimate for earnings per share is pegged at $1.20, indicating an increase of 13.2% from the prior-year quarter's level. In the past seven days, the consensus estimate for first-quarter earnings has witnessed a downward revision of 0.8%. The Zacks Consensus Estimate for revenues is pegged at $1.72 billion, implying growth of 4.6% from $1.65 billion recorded in the prior-year quarter.

Factors to Note

Yum! Brands is anticipated to report strong same-store sales growth, indicating healthy consumer demand across its portfolio of brands. The company's continued emphasis on expanding its footprint, both domestically and internationally, is likely to have contributed to its top-line growth. Notably, stellar performance from its flagship brand, KFC, is expected to play a significant role in driving its overall revenue growth.
One of the key drivers behind Yum! Brands' success is its innovative menu strategy, featuring Culinary Forward limited-time offerings that resonate with evolving consumer preferences.  Its integration of a recommended ordering system powered by AI and machine learning is anticipated to have a positive impact on its operational efficiency and customer experience. By leveraging data analytics and AI-driven insights, the company aims to personalize the ordering experience for customers, thereby enhancing satisfaction and driving incremental sales.
Same-store sales are estimated to demonstrate growth of 2.3% year over year in the to-be-reported quarter.
In first-quarter 2024, our model predicts KFC, Taco Bell and Habit Burger revenues to increase 7.1%, 3.8% and 17.7% from the year-ago levels to $735.8 million, $593.5 million and $155.4 million, respectively. However, we expect Pizza Hut revenues to decrease 2.5% from the prior-year levels to $247.5 million.
High inflation levels are likely to have affected margins in the to-be-reported quarter. Also, an increase in the cost of employee wages, benefits and insurance, and other operating costs such as rent and energy costs, is expected to have put significant pressure on YUM's margins. Our model expects total costs and expenses to increase 2.2% from the year-earlier levels.

What the Zacks Model Unveils

Our proven model doesn't conclusively predict an earnings beat for Yum! Brands this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat.
Earnings ESP: Yum! Brands has an Earnings ESP (difference between the Most Accurate Estimate and the Zacks Consensus Estimate) of -2.85%.
Zacks Rank: Yum! Brands currently carries a Zacks Rank #3.

Stocks Poised to Beat on Earnings 

Here are some stocks worth considering from the Zacks Retail-Wholesale space, as our model shows that these have the right combination of elements to beat on earnings this reporting cycle.
Wingstop Inc. WING has an Earnings ESP of +4.60% and a Zacks Rank #2 at present.

The stock has risen 49.1% year to date. WING's earnings beat estimates in each of the trailing four quarters, the average surprise being 21.3%.
Shake Shack Inc. SHAK has an Earnings ESP of +3.33% and a Zacks Rank #3 at present.
Shares of SHAK have risen 41.5% year to date. SHAK's earnings beat estimates in each of the trailing four quarters, the average surprise being 92.6%.
Restaurant Brands International Inc. QSR has an Earnings ESP of +0.44% and a Zacks Rank of 3 at present.
Shares of QSR have lost 5.5% year to date. It reported better-than-expected earnings in each of the trailing four quarters, the average surprise being 10.2%.
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