Yum! Brands, Inc. YUM delivered second-quarter 2026 results, wherein earnings surpassed the Zacks Consensus Estimate, while revenues missed the same.
Adjusted earnings of $1.62 per share increased 12.5% year over year and beat the consensus mark of $1.59 by 1.9%. Revenues rose 12.2% to $2.17 billion but fell short of the estimate of $2.18 billion by 0.6%. Results benefited from Taco Bell’s 7% same-store sales growth, while worldwide system sales increased 5% excluding foreign currency translation.
YUM Gains From Global Sales and Digital Growth
Worldwide same-store sales increased 3% in the quarter. The company’s restaurant count rose 5% year over year, supported by 1,053 gross new unit openings.
Excluding Pizza Hut, system sales increased 7% excluding foreign currency translation. Unit count grew 6%, same-store sales rose 4% and core operating profit advanced 8%. Digital system sales excluding Pizza Hut approached $9 billion, with digital transactions accounting for more than 60% of system sales.
Yum! Brands, Inc. Price, Consensus and EPS Surprise
Yum! Brands, Inc. price-consensus-eps-surprise-chart | Yum! Brands, Inc. Quote
Yum! Brands Expands KFC’s Global Footprint
KFC generated second-quarter revenues of $924 million, up 9% from $849 million in the prior-year period. System sales rose 6% excluding foreign currency translation, while same-store sales increased 2%.
Operating profit climbed 13% to $410 million. Core operating profit increased 9% after excluding currency effects. Operating margin expanded 160 basis points to 44.3%, although company-owned restaurant margin declined 10 basis points to 12%.
KFC opened 660 gross new restaurants across 55 countries, lifting its restaurant base 7% to 34,747. System sales advanced 20% in the Middle East, Turkey and North Africa, 16% in India and 10% in both Asia and Latin America.
YUM Extends Taco Bell’s Strong Momentum
Taco Bell revenues surged 20% year over year to $853 million. System sales increased 9%, supported by a 7% rise in same-store sales.
U.S. system sales grew 9%, while domestic same-store sales increased 7%. International system sales advanced 13% excluding foreign currency translation, and international same-store sales rose 5%.
Operating profit increased 19% to $311 million. Company-owned restaurant margin expanded 160 basis points to 25.9%, reflecting stronger restaurant-level profitability. However, operating margin contracted 40 basis points to 36.4%.
Taco Bell opened 54 gross new restaurants across 15 countries. Its restaurant count increased 3% to 9,046.
Yum! Brands Faces Continued Pizza Hut Weakness
Pizza Hut revenues increased 6% to $254 million. Company sales rose to $31 million from $7 million, while franchise and property revenues declined 3% to $143 million.
Underlying sales remained pressured. System sales fell 2% excluding foreign currency translation, while same-store sales declined 1%. U.S. system sales decreased 5% and international system sales were flat.
Operating profit fell 12% to $70 million, while core operating profit declined 14%. Operating margin contracted 590 basis points to 27.6%. Pizza Hut opened 333 gross new restaurants across 33 countries, taking the restaurant count 1% higher to 19,985.
YUM Advances With Pizza Hut Divestitures
YUM entered two definitive agreements to sell Pizza Hut, bringing the strategic review of the brand to a close. LongRange Capital will acquire Pizza Hut outside Mainland China, while Yum China will purchase the Mainland China operations.
The company classified $746 million of assets and $262 million of liabilities as held for sale at the end of the quarter. YUM expects the transactions to provide Pizza Hut with ownership structures tailored to its regional markets and long-term priorities.
Management also unveiled a refreshed KFC strategy focused on boneless chicken, beverages and sauces. The company aims to introduce the strategy’s core elements across KFC’s top 20 markets by the end of 2027.
Yum! Brands Posts Higher Operating Profit
GAAP operating profit increased 5% to $655 million. Core operating profit also rose 5% to $683 million after excluding special items and foreign currency effects.
Company sales advanced 25% to $837 million, while franchise and property revenues increased 7% to $895 million. General and administrative expenses rose 7% to $324 million.
GAAP earnings were $3.08 per share, up from $1.33 in the prior-year quarter. The reported figure included special-item tax benefits related mainly to the planned Pizza Hut sale and internal intellectual property transactions.
YUM Generates Solid First-Half Cash Flow
Net cash provided by operating activities totaled $923 million during the first half of 2026, up from $850 million a year earlier. Capital expenditures increased to $175 million from $142 million.
The company repurchased $674 million of common stock and paid $413 million in dividends. Cash and cash equivalents were $674 million as of June 30, 2026, while long-term debt totaled $9.46 billion and short-term borrowings were $2.81 billion.
YUM continues to target long-term average growth of 5% in units, 7% in system sales excluding currency movements and at least 8% in core operating profit.
YUM currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Here are some better-ranked stocks from the Zacks Retail-Wholesale sector:
Five Below, Inc. FIVE presently sports a Zacks Rank #1 (Strong Buy). The company delivered a trailing four-quarter earnings surprise of 70.1%, on average. FIVE stock has gained 4.4% in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Five Below’s 2026 sales and EPS indicates growth of 15.1% and 36.1%, respectively, from the year-ago period’s levels.
FIGS, Inc. FIGS has a Zacks Rank #2 (Buy) at present. The company delivered a trailing four-quarter earnings surprise of 212.5%, on average. FIGS stock has declined 4.9% in the past six months.
The Zacks Consensus Estimate for FIGS’ 2026 sales and EPS indicates growth of 15.5% and 36.8%, respectively, from the prior-year levels.
Dutch Bros Inc. BROS carries a Zacks Rank of 2 at present. The company delivered a trailing four-quarter earnings surprise of 31.6%, on average. BROS stock has increased 15.8% in the past six months.
The Zacks Consensus Estimate for Dutch Bros’ 2026 sales and EPS indicates growth of 27% and 23.7%, respectively, from the prior-year levels.
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Yum! Brands, Inc. (YUM): Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).