YUM Brands 2025 Q1 Earnings Misses Targets as Net Income Drops 19.4%

YUM! Brands reported its fiscal 2025 Q1 earnings on Apr 30th, 2025. Despite an increase in revenue, Yum! Brands fell short of analyst expectations, missing the consensus revenue estimate of $1.8 billion. Net income saw a significant decline, dropping 19.4% year-over-year to $253 million. The company anticipates an 8% growth in core operating profit for 2025, excluding the impact of the 53rd week in 2024, showing optimism amidst economic uncertainties. Investors will be keenly watching how the strategic investments and AI-powered initiatives unfold throughout the year.

Revenue

YUM! Brands reported a total revenue of $1.79 billion for the first quarter of 2025, marking an 11.8% increase from the previous year. The KFC Division contributed substantially with $773 million, while Taco Bell Division added $657 million. Pizza Hut Division recorded $231 million, and Habit Burger & Grill brought in $128 million. The corporate and unallocated segment slightly detracted from the total with a $-1 million impact, culminating in consolidated revenues of $1.79 billion.

Earnings/Net Income

YUM! Brands experienced a decline in its EPS by 18.0%, reaching $0.91 in fiscal 2025 Q1 compared to $1.11 in the same quarter of 2024. The net income also decreased notably to $253 million, representing a 19.4% drop from $314 million in the previous year. The EPS indicates weaker performance compared to last year.

Post Earnings Price Action Review

The impact of YUM! Brands' earnings report metrics on its stock price shows some short-term volatility, yet indicates that positive earnings metrics can lead to modest gains. Revenue has a significant impact on the stock price, evidenced by a 3-day win rate of 53.47% and a 10-day win rate of 52.04%. Similarly, net income positively influences the stock price, with a 3-day win rate of 55.15% and a 10-day win rate of 52.04%. The diluted EPS impact is slightly lower, with a 3-day win rate of 52.04% and a 10-day win rate of 50%. However, all three metrics observed a maximum return of 3.83% over a 30-day period, suggesting potential gains in the medium term. While investors may consider these metrics in their decision-making, they should also account for other influencing factors such as market conditions and company-specific news, as historical performance is not necessarily indicative of future results.

CEO Commentary

David Gibbs, Chief Executive Officer, highlighted Yum! Brands' strong first quarter with an 8% increase in core operating profit, notably driven by Taco Bell U.S. and KFC International. He emphasized the competitive advantages of their AI-powered digital platform, Byte by Yum!, which enhances operational efficiency. Gibbs expressed enthusiasm about the business's direction, citing Taco Bell’s 9% same-store sales growth and significant consumer penetration improvements. He also mentioned the planned leadership transition, noting it was timely given the company's position of strength. Overall, Gibbs conveyed optimism, underscoring confidence in the company's growth and innovation strategies.

Guidance

Yum! Brands expects to achieve 8% growth in core operating profit for 2025, excluding impacts from the 53rd week in 2024. Taco Bell U.S. margins are anticipated to range between 24% to 25% for the full year. The company plans to maintain a net leverage ratio around 4 times over the medium term and focus on strategic investments while navigating economic uncertainties. A favorable foreign exchange rate is expected to contribute a $10 million tailwind to GAAP operating profit for the remainder of the year.

Additional News

YUM! Brands has announced plans for a leadership transition, with CEO David Gibbs set to retire in 2026. This decision aligns with the company's current position of strength and strategic direction. In other news, KFC India’s #SpeakSign Campaign has received recognition, winning 14 awards for championing inclusivity. Meanwhile, Yum! Brands aims to accelerate AI innovation through an industry-first collaboration with NVIDIA, enhancing its digital capabilities. These initiatives reflect the company’s commitment to growth and innovation amidst evolving market dynamics. Additionally, Yum! Brands plans to return $3 billion to shareholders through 2026, continuing its capital return strategy.