It has been about a month since the last earnings report for Yum China Holdings (YUMC) . Shares have added about 1.4% in that time frame, underperforming the S&P 500.Will the recent positive trend continue leading up to its next earnings release, or is Yum China due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers. Yum China Q2 Earnings Top, Revenues Lag, ...

Company Overview - As of June 30, 2024, Yum China operates 15,423 restaurants across over 2,100 cities in China, making it the largest restaurant company in the country by system sales[5]. - KFC is the leading fast-food brand in China, with 10,931 restaurants as of June 30, 2024, while Pizza Hut is the largest casual dining brand with 3,504 restaurants[5]. - The company has exclusive operating rights for KFC, Pizza Hut, and Taco Bell (pending certain milestones) in mainland China, and fully owns the intellectual property for Little Sheep and Huang Ji Huang brands[5]. - The company is exploring expansion opportunities in existing and new cities within China, indicating a strong outlook for future growth[5]. - The company has established a joint venture with Lavazza Group to explore and develop the Lavazza coffee brand concept in China[5]. Financial Performance - System sales growth for the six months ended June 30, 2024, was 5%, down from 24% in the same period of 2023[9]. - Same-store sales decreased by 3% for the six months ended June 30, 2024, compared to an increase of 11% in the same period of 2023[9]. - Operating profit for the six months ended June 30, 2024, was $640 million, a decrease of 5% from $673 million in the same period of 2023[9]. - Net profit increased by 3% to $499 million for the six months ended June 30, 2024, compared to $486 million in the same period of 2023[11]. - Total revenue for the six months ended June 30, 2024, was $5.637 billion, reflecting a 1% increase from $5.571 billion in the same period of 2023[11]. - Core operating profit for the six months ended June 30, 2024, was $671 million, an increase of 5% from $639 million in the same period of 2023[11]. - Adjusted EBITDA for the six months ended June 30, 2024, was $894 million, down from $927 million in 2023[17]. - The company reported a restaurant profit of $884 million, which is a significant increase from the previous year's profit of $967 million[19]. Shareholder Returns - The company aims to return a record $1.5 billion to shareholders through quarterly cash dividends and share repurchases[13]. - The quarterly cash dividend declared on August 5, 2024, is $0.16 per share, totaling approximately $61 million[50]. - The company repurchased approximately 21.7 million shares for $868 million and 2.1 million shares for $124 million in the six months ending June 30, 2024, and 2023 respectively[50]. Capital Expenditures and Investments - Capital expenditures are projected to be between $700 million and $850 million for fiscal year 2024[13]. - The company plans to open approximately 1,500 to 1,700 new stores in fiscal year 2024[13]. - The company generated a net cash inflow of $2.2 billion from a global issuance in September 2020, which supports future operations and capital expenditures[48]. Tax and Regulatory Matters - The company is undergoing a tax audit by Chinese tax authorities regarding transfer pricing, which may have significant implications for its financial condition and operating performance[42]. - The actual tax rate for the six months ended June 30, 2024, was 26.2%, down from 27.0% in 2023[16]. - The company anticipates potential significant developments in the next 12 months regarding the ongoing tax review and discussions with tax authorities[42]. Risk Management - The company faces foreign currency exchange rate risks, primarily due to its operations in China, which could impact reported revenues and cash flows[62]. - The company manages commodity price risks through pricing agreements with suppliers, although its ability to pass on increased costs may be limited by the competitive environment[63]. Employee and Operational Insights - The company employs around 400,000 employees, with approximately 90% being restaurant staff, and about 70% of restaurant employees working part-time[61]. - The company received temporary subsidies from the government for employee benefits and training, which were recognized as reductions in restaurant expenses[21]. Corporate Governance - The company has complied with all corporate governance code provisions during the reporting period, except for certain provisions related to the audit, compensation, and nomination committees[117]. - The company’s governance principles align with the corporate governance code as per the Hong Kong Listing Rules[117]. Future Outlook - The company plans to continue expanding its market presence and investing in new product development to drive future growth[20]. - The company is currently evaluating the potential impact of new accounting standards effective from January 1, 2024, and January 1, 2025, on its financial statements[60].

loveguli Yum China Holdings, Inc. (NYSE:YUMC) offers an attractive buying opportunity after good Q2 2024 results, and a significant cluster of insider buying activity in the days following the earning release. In this article, I will walk you through the different aspects of my investment thesis, and I will try to convey in the most direct way possible the different events that motivated my Strong Buy rating. Additionally, I will go through some of the headwinds in Q2 2024, especially their strategic ...

jetcityimage Summary Following my coverage of Yum China Holdings (NYSE:YUMC) in May'24, in which I recommended a buy rating as the business fundamentals continue to improve and I was optimistic about management’s strategy of opening new stores and growing same-store sales growth [SSSG], this post is to provide an update on my thoughts on the business and stock. I still give a buy rating for YUMC as it continues to demonstrate solid execution despite the weak macro environment, especially against peers. ...

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Investment Rating - The investment rating for the company is "Buy" and is maintained [2] Core Views - The company achieved a total revenue of $2.68 billion in Q2 2024, a year-on-year increase of 1%, with operating profit reaching $266 million, up 4% year-on-year, both setting new records for Q2 [1] - The company continues to expand its store network, with a total of 15,423 stores as of June 30, 2024, including 10,931 KFC and 3,504 Pizza Hut locations [1] - System sales increased by 4% year-on-year in Q2 2024, driven by an 8% contribution from net new stores [1] - Same-store sales have declined for two consecutive quarters, with Q2 2024 showing a decrease of 4% overall, 3% for KFC, and 8% for Pizza Hut [1] - The company reported a significant increase in delivery sales, which grew by 11% year-on-year, with digital orders accounting for 90% of restaurant revenue [1] - The company is focused on optimizing its menu and processes, leveraging automation and AI technology to enhance operational efficiency [1] - The management has committed to returning approximately $2.49 billion to shareholders in Q2 2024 through stock buybacks and cash dividends, with a total of nearly $1 billion returned year-to-date [1] Financial Summary - The company projects revenues of $11.15 billion, $12.00 billion, and $13.00 billion for 2024, 2025, and 2026 respectively, with net profits of $847 million, $917 million, and $1.007 billion for the same years [3][4] - The current price-to-earnings (P/E) ratios are projected to be 15x, 14x, and 13x for 2024, 2025, and 2026 respectively [1][4] - The company has a total market capitalization of approximately HKD 101.38 billion [2]

A recommendation upgrade from an analyst put the cap on an encouraging quarterly earnings report.Economic growth in China might not be what it once was, but certain imported businesses aren't doing too badly. Case in point: restaurateur Yum China Holdings (YUMC 0.80%), which recently posted quarterly earnings that cheered investors. They also inspired one analyst to upgrade her recommendation on the stock, helping to propel it to a nearly 16% week-to-date gain as of early Friday morning, according to data c ...

Financial Performance - Total revenue grew by 1% to $5.64 billion, or 5% excluding foreign currency translation effects[1] - Net profit attributable to Yum China Holdings, Inc. was $499 million, up from $486 million in the prior year[6] - Net profit for the six months ended June 30, 2024, was $535 million, compared to $527 million in the same period of 2023, reflecting a year-over-year increase of 1.5%[8] - Comprehensive income, including non-controlling interests, was $424 million, compared to $282 million in the previous year[7] - Diluted earnings per share rose by 10% to $1.26, or 14% excluding foreign currency translation effects[2] - The company reported a significant operating profit margin, with total costs and expenses netting $4.390 billion, resulting in an operating profit of $1.244 billion[60] - The effective tax rate for the six months ended June 30, 2024, was 26.2%, a decrease from 27.0% in 2023, primarily due to a reduction in non-deductible items[51] - The actual tax rate for the six months ended June 30, 2024, was 26.2%, slightly lower than 27.0% in the same period of 2023[100] Store Operations - System sales increased by 5% year-over-year, driven by an 8% contribution from net new store openings, partially offset by a decline in same-store sales[1] - The total number of stores reached 15,423, with 10,931 KFC and 3,504 Pizza Hut locations, adding a net of 779 stores during the period[1] - Same-store sales reached 97% of the prior year's level, despite strong performance in the same period last year[1] - The company plans to open approximately 1,500 to 1,700 new stores in fiscal year 2024[78] - The number of self-operated restaurants increased by 13% to 13,278 from 11,747 year-over-year[77] Shareholder Returns - Yum China returned nearly $1 billion to shareholders through stock buybacks and cash dividends, exceeding the total for the entire year of 2023[2] - The company paid a cash dividend of $0.26 per share for the fiscal year ending December 31, 2023[10] - The estimated cash dividend of $0.16 per share for Yum China common stock totals approximately $61 million, payable on September 17, 2024[59] - The board authorized an increase in the stock repurchase program by $1 billion, totaling $3.4 billion[111] Cash Flow and Liquidity - Cash generated from operating activities for the six months ended June 30, 2024, was $843 million, down from $924 million in the same period of 2023, representing a decrease of 8.8%[8] - Cash and cash equivalents decreased to $1,043 million as of June 30, 2024, from $1,128 million as of December 31, 2023, a decline of 7.5%[9] - The total cash and cash equivalents reported as of June 30, 2024, is $1.305 billion, indicating a strong liquidity position[61] Capital Expenditures and Investments - The company reported a capital expenditure of $358 million for the six months ended June 30, 2024, compared to $332 million in the same period of 2023, reflecting an increase of 7.8%[8] - Capital expenditures for the fiscal year 2024 are expected to range between $700 million and $850 million[110] - The company completed the acquisition of a 28% stake in Hangzhou Beverage for $255 million, gaining control of Hangzhou KFC with approximately 60% ownership[15] Debt and Liabilities - Total liabilities increased to $5,086 million as of June 30, 2024, compared to $4,912 million as of December 31, 2023, marking an increase of 3.5%[9] - The company reported short-term bank borrowings of $416 million as of June 30, 2024, significantly up from $168 million as of December 31, 2023[39] - The company's debt-to-equity ratio was 6.4% as of June 30, 2024, compared to 2.4% as of December 31, 2023[115] Revenue Breakdown - Company restaurant revenue for KFC was $4,120 million and for Pizza Hut was $1,137 million, totaling $5,289 million[25] - The company reported revenue from external customers for KFC at $4,244 million and for Pizza Hut at $1,135 million for the six months ended June 30, 2024, totaling $5,637 million[54] - Franchise fee income amounted to $46 million, with KFC contributing $32 million and Pizza Hut $4 million[25] Operational Efficiency - The company has a centralized procurement system for most food and packaging materials, which enhances operational efficiency and revenue generation[22] - The company recognized unrealized gains from its investment in Meituan of $16 million for the six months ended June 30, 2024, compared to a loss of $29 million for the same period in 2023[18] Tax and Regulatory Matters - The company continues to monitor regulatory developments related to the Corporate Alternative Minimum Tax (CAMT) and its potential impact on financial statements[51] - The company is undergoing a tax audit by Chinese tax authorities regarding transfer pricing arrangements, which may have a significant adverse impact on its financial condition and cash flow if additional taxes are assessed[105] Market Position and Strategy - Yum China Holdings, Inc. operates 15,423 restaurants across over 2,100 cities in China as of June 30, 2024, making it the largest restaurant company in the country by system sales[70] - KFC is the leading fast-food brand in China, with 10,931 restaurants operating in over 2,100 cities as of June 30, 2024[70] - The company believes there are significant further expansion opportunities within China, focusing on both existing and new cities[70] Impairment and Asset Management - The company recognized impairment charges of $7 million for restaurant-level assets for the six months ended June 30, 2024, compared to $14 million for the same period in 2023[50] - The company utilizes a two-step impairment loss measurement for long-term assets under US GAAP, which may differ from the one-step approach under IFRS[68]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _________________ Commission file number 001-37762 Yum China Holdings, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware 81 ...

Investment Rating - The investment rating for Yum China (09987) is "Buy" [5] Core Views - The company achieved a net profit of $212 million in Q2 2024, exceeding expectations, with total revenue of $2.679 billion, a year-on-year increase of 1% [1] - The growth in revenue is primarily driven by a rapid increase in new store openings, with a total store count growing by 13% year-on-year [1] - Cost reduction and efficiency improvements have significantly contributed to profit growth, with the profit margin for Pizza Hut restaurants increasing by nearly 1 percentage point [2] - The company maintains its commitment to a $1.5 billion shareholder return for the year, having completed nearly $1 billion in the first half of 2024 [1] Summary by Sections Financial Performance - In Q2 2024, the company reported operating income of $266 million, a year-on-year increase of 4%, and a net profit of $212 million, up 8% year-on-year [1] - Revenue growth is attributed to new store openings and effective cost management, with overall management expense ratio improving by approximately 1 percentage point [2] Store Expansion - The company continues its expansion trend, with KFC and Pizza Hut store counts increasing by 14% year-on-year [3] - The company aims to open 1,500 to 1,700 new stores within the year, with a focus on innovative store formats like KFC Coffee and Pizza Hut's "Wow" stores [3] Profit Forecast and Valuation - Yum China is projected to achieve revenues of $11.332 billion, $12.316 billion, and $13.251 billion from 2024 to 2026, with year-on-year growth rates of 3%, 9%, and 8% respectively [4] - The net profit forecast for the same period is $852 million, $940 million, and $1.019 billion, with corresponding year-on-year growth rates of 3%, 10%, and 8% [4] - The company is expected to maintain a price-to-earnings ratio (P/E) of 15x, 14x, and 13x for the years 2024, 2025, and 2026 respectively [4]