Restaurant chains operator Yum! Brands Inc. (YUM) said Monday after the markets closed that its fourth quarter profit rose 30% from last year, helped by strong performance of its China division. The company's quarterly earnings per share also came in above analysts' expectations as did its quarterly revenue.
The Louisville, Kentucky-based company reported net income for the fourth quarter of $356 million or $0.75 per share, compared to $274 million or $0.56 per share for the year-ago quarter.
Excluding special items, adjusted earnings for the fourth quarter were $0.75 per share, compared to $0.63 per share in the prior year quarter.
On average, 20 analysts polled by Thomson Reuters expected the company to earn $0.74 per share for the fourth quarter. Analysts estimates typically exclude special items.
The parent of the Taco Bell, Pizza Hut and KFC chains said total revenues for the fourth quarter increased 15% to $4.11 billion from $3.56 billion in the same quarter last year. Eighteen analysts had a consensus revenue estimate of $4.03 billion for the fourth quarter.
For the quarter, company sales rose 16% to $3.57 billion, while franchise and license fees and income grew 13% to $554 million.
The company's U.S. division posted total revenues of $1.78 billion in the fourth quarter, down 4% from $1.22 million in the fourth quarter of last year. U.S. division's same-store sales for the quarter grew 1%, driven by growth of 6% at Pizza Hut and offset by declines of 2% at Taco Bell and 1% at KFC. The division's operating profit rose 10% to $191 million from $173 million a year earlier. The company had expected profit performance in the U.S. to improve by the fourth quarter.
Yum! Brands' company ownership in the U.S. dropped to 13% from 15% last year. The company refranchised 404 restaurants, including 264 KFCs, 74 Taco Bells and 66 Pizza Huts in 2011. Its target for Pizza Hut and KFC is about 5% company ownership. The company also said in December that it plans to reduce company ownership in Taco Bell from 23% to about 16% over the next two years.
During the fourth quarter, Yum! Brands divested its Long John Silver's and A&W All American Restaurants brands to key franchisee leaders.
China division's total revenues surged 39% to $1.88 billion in the fourth quarter from $1.35 million a year earlier, while same-store sales jumped 21% and operating profit rose 21% to $210 million. China Division includes solely the results of the company's operations in mainland China. The company opened 327 new restaurants during the fourth quarter in mainland China, taking the full year total to 656 restaurants.
Yum! Restaurant International division's total revenues for the quarter increased 7% to $1.05 billion from $987 million a year ago, while operating profit grew 13% to $207 million from $184 million last year.
David 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 are proud of our consistent track record of growth and are well-positioned to meet or exceed our annual target of at least 10% EPS growth in 2012," Novak added.
Yum! is facing stiff competition in the Chinese market, which, of late, has become a favorite hub for global fast-food chains. Hamburger chain McDonald's Corp. (MCD) has announced that it plans to boost investment in China and double its presence there by 2013.
As for other U.S. companies, California Pizza Kitchen Inc. (CPKI) and Starbucks Corp. (SBUX) also have a presence in the Chinese market, and are planning to expand.
Yum! Brands is also planning for a big push in the Indian market. The company is planning to increase its number of restaurants in India, and is aiming at total sales of $1 billion from that country by 2015. The company has also created a separate division as Yum! Restaurants India.
Yum! Brands shares, which have traded in a range of $47.15 to $64.75 over the past year, closed Monday's regular trading session at $63.19, down 65 cents or 1.02%. The stock is currently gaining $1.36 or 2.15% in after hours trading.
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