Shares of Yum China Holdings, Inc. YUMC have increased 30.9% in the past year outpacing the industry’s gain of 25.7%. Robust KFC and Pizza Hut sales continue to drive the company’s performance.
The Zacks Rank #1 (Strong Buy) company has an impressive long-term earnings growth rate of 19.9%. Our model predicts YUMC’s 2023 earnings and sales to witness growth of 92.3% and 18.9% year over year, respectively.
Let’s delve deeper.
Growth Catalysts
Our model estimates KFC segment’s revenues to grow 18.2% year over year. KFC’s extraordinary performance is attributable to greater sales of menu offerings like crayfish burger, stuffed chicken wing and spicy chicken burger.
Yum China is also serving coffee across its restaurants and expanding the dessert category. It will increase investment to expand presence in the Coffee segment, as it believes that the beverage has a strong demand in China.
On the other hand, Pizza Hut segment’s revenues are likely to witness growth of 21.7% year over year. Pizza Hut operates 2,983 units and is keeping pace with rising consumer demand for casual dining and delivery services.
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Yum China focuses on relentless unit growth of restaurants to drive incremental sales. In 2018, it opened 819 restaurants and remodeled 931 stores. In 2019, 2020, 2021 and 2022, YUMC opened 1,006, 1,165, 1,806 and 1,159 stores, respectively. In first-quarter 2023, it opened 233 net new stores. In 2023, it intends to open 1,100-1,300 new stores across its brands.
Yum China holds a leadership position in the Chinese restaurant space when it comes to delivery, mobile order and pay, and loyalty membership. The company is increasingly shifting toward digital and content marketing to expand its customer base. It has adopted a high-grade delivery strategy that includes collaborating with aggregators to source traffic and fulfills orders by YUMC’s KFC riders. The company has been strengthening its membership program in Super App to engage members and improve customer service.
Yum China created a robust loyalty program with more than 430 million loyalty members cumulatively. Pizza Hut’s membership increased by 100 million members. In the first quarter of 2023, member sales accounted for nearly 60% of system sales.
Other key Picks
Some other top-ranked stocks from the Zacks Retail-Wholesale sector are Dave & Buster's Entertainment, Inc. PLAY, Chipotle Mexican Grill, Inc. CMG and Chuy's Holdings, Inc. CHUY, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dave & Buster's Entertainment has a trailing four-quarter earnings surprise of 6.8%, on average. The stock has gained 18.4% in the past year.
The Zacks Consensus Estimate for PLAY’s 2023 sales and EPS suggests growth of 17.1% and 25.5%, respectively, from the year-ago period’s levels.
Chipotle has a trailing four-quarter earnings surprise of 4.7%, on average. The stock has soared 58.9% in the past year.
The Zacks Consensus Estimate for CMG’s 2023 sales and EPS suggests rises of 14.1% and 33.9%, respectively, from the year-ago period’s levels.
Chuy's Holdings has a trailing four-quarter earnings surprise of 23.4%, on average. The stock has surged 103.3% in the past year.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS suggests improvements of 9.9% and 27%, respectively, from the year-ago period’s levels.
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Chuy's Holdings, Inc. (CHUY) : Free Stock Analysis Report
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Yum China (YUMC) : Free Stock Analysis Report
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