What: Fast-food giant Yum! Brands' stock bounced higher by 12% in February, according to S&P Capital IQ data. By the end of the month the owner of Taco Bell, Pizza Hut, and KFC restaurants nearly broke its all-time high stock price of $82 per share that was set last summer.
So what: The stock jump came after Yum! posted mixed fourth-quarter earnings results on Feb. 4. Its China division, which accounts for more than half of revenue, saw comparable-store sales dive lower by 16%. That result was even worse than the prior quarter's 14% drop. And profit tanked by 84% as the KFC brand hasn't yet recovered from negative publicity tied to last year's food safety scandal in China. However, CEO Greg Creed suggested that management expects a rebound soon. "We anticipate a strong second half of 2015 as the turnaround gains momentum," he said in a press release.
Meanwhile, Yum!'s Taco Bell brand is growing surprisingly well in the United States. Comparable-store sales rose 6% thanks to a lift from new menu introductions and its popular breakfast program. That's double the growth rate that Burger King set in the fourth quarter, and also well ahead of McDonald's -2% comps. Taco Bell's profitability leaped higher by 3 percentage points to reach an impressive 28% of sales in the fourth quarter.
Now what: The strong growth in the Taco Bell business has Yum!'s management confident that it can deliver significant profit gains this year even as China struggles. Given the depth of the sales pressure right now, investors shouldn't bank on a quick rebound for the international KFC business. But overall profit gains are likely this year. Yum! affirmed its outlook for "at least" 10% growth in per share earnings in 2015, compared to a 2% drop in 2014.
The article Why Yum! Brands, Inc. Stock Jumped 12% in February originally appeared on Fool.com.
Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool recommends McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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