Yum! (YUM) beats profit estimates, Hershey (HSY) raises guidance

Highlights

• Yum! Brands’ (NYSE:YUM) system sales grew 8%, excluding foreign currency translation.
  
  
• CEO David Gibbs said the purchase of Dragontail and its AI-powered kitchen orders strengthened Yum! Brands’ digital capabilities and helped improve performance.
  
  
• The Hershey Company’s (NYSE:HSY) net income was US$444.9 million, or US$2.14 per share diluted, in the quarter. The adjusted EPS diluted was US$2.10 per share, up 12.9% YoY.

Fast-food company Yum! Brands, Inc. (NYSE:YUM) and the world’s largest chocolate maker, The Hershey Company (NYSE:HSY), on Thursday reported strong revenue growth in the third quarter.

However, YUM stock was down 0.24% to US$125.49, while the HSY stock traded at US$179.75, up 0.13%, at around 1:00 pm ET from their previous closing prices.

Third-quarter updates:

Yum! Brands, Inc.

Yum! Brands’ global system sales grew 8%, excluding foreign currency translation. KFC sales were up 11% YoY, while Taco Bell and Pizza Hut sales increased 8% and 4% year-over-year, respectively.

The company’s adjusted profit was US$1.22 per share on revenue of US$1.61 billion, beating Wall Street estimates of US$1.08 a share on revenue of US$1.59 billion.

CEO David Gibbs said the company saw sustained sales growth across stores helped by franchise partners.

The same-store sales grew 5% in the quarter, or 3% on a two-year basis, demonstrating the strength of its diversified business model despite threats from the Delta variant in key markets, he said.

Gibbs said the purchase of Dragontail and its AI-powered kitchen orders strengthened Yum! Brands’ digital capabilities and helped improve performance.

Stock Performance

The stock rose more than 18% year-to-date. Its 52-week highest and lowest stock prices were US$135.77 and US$92.22, respectively.

Further, its P/E ratio is 28.68, the forward P/E one-year ratio is 28.46, and the EPS is US$4.36. In addition, its annualized dividend is US$2.00. Yum! Brands’ market cap is US$36.964 billion.

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Source: Pixabay

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The Hershey Company

Hershey’s consolidated net sales in the third quarter increased by 6.3% to US$2,359.8 million. The organic net sales rose 4.4% on a constant currency basis.

Hershey CEO Michele Buck said consumer demand has been robust. In addition, he said improved tax position and brand investment are likely to compensate for inflation and higher supply chain costs in the coming months. He also announced raising sales and earnings guidance for FY 2021.

Hershey’s net income was US$444.9 million, or US$2.14 per share diluted, in the quarter. The adjusted EPS diluted was US$2.10 per share, up 12.9% YoY.

Hershey expects full-year net sales growth to be in the range of 8% to 9%, up from 6% to 8% previously projected. Hershey also anticipates its full-year EPS to be between US$6.88 and US$7.04 per share, up 13% to 15% from US$6.11 per share in fiscal 2020.

Stock Performance

The stock gained around 19% year-to-date. The 52-week highest and the lowest stock prices were US$182.71 and US$135.83, respectively. In addition, its P/E ratio is 26.12, and the forward P/E one-year ratio is 25.87. Further, its EPS is US$6.88, and the annualized dividend is US$3.604.

Hershey’s current market cap is around US$37.02 billion.

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Bottomline

Food and restaurant companies have posted significant gains over the past two quarters. While they are still not fully out of the woods, but they are certainly seeing considerable growth. Issues like inflation and rising supply chain costs have been a challenge. Nevertheless, analysts expect significant recovery from the covid-induced disruptions by next year. However, investors should evaluate the companies carefully before investing in the stock market.