Shares of Yum China (NYSE: YUMC) popped after the Chinese fast-food chain operator announced stronger-than-expected fourth-quarter 2023 results.
Yum China ended 2023 on a high note
Yum China's total revenue in Q4 grew 19% year over year to $2.49 billion, translating to adjusted (non-GAAP) earnings of $103 million, or $0.25 per diluted share. Analysts, on average, were only expecting earnings of $0.16 per share on revenue of $2.33 billion.
Digging deeper into Yum China's results, system sales at KFC locations grew 20% year over year, helped by a combination of 12% growth from new restaurant locations, a 3% increase in same-store sales, and the lapping of temporary closures in last year's Q4. System sales from Yum China's Pizza Hut locations grew 24%, helped by a 12% increase from new locations, a 6% increase in same-store sales, and last year's temporary closures.
Yum China CEO Joey Wat called it a "pivotal year," adding "Not only did we demonstrate strong resilience during the pandemic, but we also seized opportunities that arose from China's reopening."
If that wasn't enough, Yum China raised its quarterly dividend by 23% to $0.16 per share as well.
What's next for Yum China shareholders?
For the full-year 2024, Yum China also plans to repurchase $1.25 billion of its common stock through open-market transactions, even as it opens 1,500 to 1,700 net new stores in the country.
Yum China further told investors that by 2026 it plans to reach a total store count of 20,000 (up from 14,644 at the end of 2023). That should result in high-single to double-digit percent compound annual growth for system sales and double-digit growth in earnings per share from 2023 levels.
All told, this was a fantastic quarterly report, coupled with notable increases in capital returns and encouraging guidance for growth over the next few years. Yum China stock is understandably rallying in response.
Should you invest $1,000 in Yum China right now?
Before you buy stock in Yum China, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Yum China wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of February 6, 2024
Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
