Why Yum China Stock Popped Today

Shares of Yum China (YUMC 7.88%) 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.