Yum Brands anticipates weaker outlook for fiscal 2020 amidst the Coronavirus outbreak in China

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Updated on Mar 11, 2020
Reading time 3 minutes
  • Yum Brands anticipates weaker outlook for fiscal 2020 amidst the Coronavirus outbreak in China.
  • Yum Brands beats analysts' estimate for revenue but misses on the earnings front in Q4.
  • Yum Brands to add Habit Restaurants to its portfolio by the second quarter of 2020.

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Having missed the experts’ estimate for earnings in the fourth quarter, Yum Brands announced on Thursday that its outlook for fiscal 2020 is expected to remain under pressure owing to the recent outbreak of Coronavirus in China that will hurt business in its one of the largest markets. The company also cited Pizza Hut’s failure to turnaround business in the United States to add to the challenges that the American fast-food corporation is likely to face this year.

Yum Brands Traded Around 4% Lower On Thursday

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Following the announcement on Thursday, Yum Brands was seen trading 4% lower in morning trading. In the long run, Yum forecasts 2% to 3% growth in its annual same-store sales while a 4% growth was anticipated for new restaurants.

Based on Refinitiv’s data, analysts were expecting Yum Brands to print $1.66 billion in revenue in the fourth quarter. On the earnings front, the company was expected to make $1.13 of earnings per share (EPS). The Q4 earnings report on Thursday declared the American fast-food corporation to have beaten the estimate for revenue with a higher $1.69 billion in the fourth quarter. In terms of earnings, however, it fell shy at $1 per share in the recent quarter. Yum Brands also missed estimate for same-store sales that were anticipated to grow by 2.3% in Q4 while the report declared a lower 2% growth on this front.

Yum Brands accentuated its net income in the fourth quarter at $488 million that was sharply higher than the $334 million that it reported in the same quarter last year. At $1.69 billion, an increase in net sales was recorded at 9% year over year.

Yum Brands To Add Habit Restaurants To Its Portfolio

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After KFC, Taco Bell, and Pizza Hut, Yum Brands also expressed its plans of bringing a fourth player, Habit Restaurants, to its portfolio in its announcement in January. Habit Restaurants is more commonly known as the owner of Habit Burger Grill. As per Yum Brands, the acquisition is likely to be finalized by 2020’s second quarter.

Yum’s performance in the stock market in 2020 so far has been modestly upbeat. Opening at around $102 per share in January, the stock has hit a high of just over $106. At the time of writing, it is exchanging hands at $103.75. The growth in the American fast-food corporation’s stock in 2019 was reported at around 10%.

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