Kentucky-based Yum! Brands Inc. (YUM), the fast-food giant reaffirmed its earnings growth target of 14% for fiscal 2010, indicating that adjusted earnings will be in the range of $2.43 to $2.48 per share. The strong growth guidance was driven by robust performances in its China division and new unit development in China and Yum Restaurants International (YRI).
The world’s largest restaurant company in terms of system restaurants appears on track to achieve its annual earning per share growth target of at least 10%. The growth will mostly be driven by unit development, comparable-store sales growth, restaurant operating margin expansion, modest recovery in U.S. and share repurchases as well as dividend payments.
For FY11, Yum! Brands forecast earnings per share (EPS) growth of at least 10%, excluding special items. This will mark the tenth consecutive year of the company’s meeting or exceeding its annual EPS growth target.
Moreover, management’s earnings growth model includes annual operating profit growth of at least 15% in the China Division attributable to its two leading brands KFC and Pizza Hut, 10% in the YRI division and 6% in Taco Bell.
Yum! is also slated to open about 1,400 international units, mostly in China and YRI divisions, in fiscal 2011. This will make it the industry’s leading international new unit developer.
In September, Yum! hiked its quarterly dividend by 4 cents to 25 cents per share. Notably, its close competitor McDonald’s Corp. (MCD) also raised its quarterly dividend by 6 cents to 61 cents per share.
The current Zacks Consensus Estimates for fiscal 2010 and 2011 is $2.50 and $2.81, respectively, representing an annualized growth of 15.9% and 12.2%. The quick service restaurant company has outperformed the Zacks Consensus Estimate in the past and we expect the same trend to continue in future.
We expect to get more insight about the company’s strategies and global expansion outlook at its annual investor meeting on December 8, 2010.
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