CHICAGO – Yum Brands Inc. (YUM), parent of the KFC, Taco Bell (search) and Pizza Hut fast-food chains, on Tuesday posted an earnings increase that beat Wall Street estimates, and raised its profit outlook as overseas sales surged.
Net income for the second quarter ended June 12 jumped to $178 million, or 58 cents per share, from $122 million, or 40 cents per share, a year ago. Yum shares edged higher in after-hours trading.
Excluding a one-time recovery from bankrupt AmeriServe food and supplies distributor, the company earned 55 cents per share. That exceeded Wall Street analysts' average estimate of 52 cents per share, according to Reuters Estimates.
"The underlying strength of our global base is allowing us to offset significant commodity inflation in the U.S." Yum Chairman and Chief Executive David Novak said in a statement.
The Louisville, Kentucky company also boosted its 2004 earnings target by 3 cents a share to at least $2.33 a share before special items, heartened by the popularity of KFC (search) and Pizza Hut (search) in countries like China and the United Kingdom. Net income is expected to be at least $2.36 a share.
The company said it was comfortable with analysts' third-quarter average estimate of 60 cents a share.
Yum's shares rose in extended hours trading to $37.14 on the INET electronic brokerage system from its $37.01 close on the New York Stock Exchange.
The company's international operating profit, which rose 23 percent during the quarter, helped combat weaker U.S. profit margins due to higher prices on key ingredients like meat and cheese, the company said.
Yum expects commodity costs to rise at "above-average" rates through the rest of the year. It added, however, that it expects to benefit from a lower tax rate and interest expense as well as a rise in U.S. blended same-store sales of 2 to 3 percent and an increase in international operating profit of at least 18 percent in U.S. dollar terms.
The United Kingdom and China are Yum's most profitable overseas markets, and China is by far the fastest-growing. The company has added 116 units, mostly KFCs, in China since the beginning of the year. It now operates over 1,000 restaurants in China, while its closest competitor, McDonald's Corp., has about 600.
Total revenue for the quarter rose 7 percent to $2.08 billion. Meanwhile, systemwide sales at restaurants open at least a year were up 2 percent.
For the four weeks ended July 10, U.S. blended same-store sales rose 4 percent, led by a 6 percent rise at Pizza Hut. Taco Bell same-store sales were up 5 percent for the period, while same-store sales at KFC, which the company is trying to turn around, were flat.