Food chain stock to watch: Yum China Holdings Inc (NYSE: YUMC)

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Yum China Holdings Inc (NYSE: YUMC) stock fell over 0.5% on 30th October, 2019 (as of 10:34 am GMT-4 ·; Source: Google finance as the company posted weak results for the third quarter of FY 19 due to higher chicken prices, while growth from Pizza Hut trailed analysts’ projections. Same-store sales rose 2% in the third quarter, compared with the 2.3% growth estimated by analysts, according to Consensus Metrix. The same measure at Pizza Hut rose 1%, slightly below estimates, while KFC outperformed with a 3% increase.

The company has reported 11% increase in the net Income to $223 million from $203 million in the prior year period, mainly due to the increase in operating profit and mark to market gain from the equity investment in Meituan Dianping. The company had opened 231 new restaurants during the third quarter, which brought the total store count to 8,917 across more than 1,300 cities. Further, KFC has reported strong sales and profit growth as the company had strategically decreased promotion intensity to protect margins. Pizza Hut has maintained positive sales momentum with a decline in margin during the third quarter due to the important and necessary long-term investments in the revitalization program.

In the third quarter of 2019, YUMC’s restaurant margin was 17.7%, as compared with 17.6% in the prior year period, mainly due to sales leverage, productivity improvement and other cost savings, which was partially offset by wage and commodity inflation and promotional activities.

YUMC in the third quarter of FY 19 has reported the adjusted earnings per share of 58 cents, beating the analysts’ estimates for the adjusted earnings per share of 55 cents, according to the analysts polled by FactSet. The company had reported the adjusted revenue growth of 5 percent to $2.32 billion in the third quarter of FY 19, missing the analysts’ estimates for revenue of $2.37 billion. There is 8% increase in the total system sales year over year, and posted growth of 10% at KFC and 3% at Pizza Hut, excluding F/X.

Additionally, the company has declared a cash dividend of $0.12 per share on Yum China’s common share, which is payable as of the close of business on December 17, 2019 to shareholders of record as of the close of business on November 26, 2019. During the third quarter, the company had repurchased approximately 1.4 million shares of Yum China common share for $64.0 million at an average price of $44.70 per share.

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