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KFC parent plunges 18% after key China metric miss

KFC parent Yum Brands stock plunged Tuesday after it missed Wall Street's earnings and revenue estimates. A key China metric also disappointed.

Yum Brands last dropped 18 percent in after-hours trade. (Click here to track the restaurant company's shares.) This represents a decline of $6.3 billion in value if the stock were to open at the same level, or slightly more than the market cap of a Dunkin' Brands and Shake Shack combined.

An advertisement for a Yum! Brands' KFC restaurant in Guangzhou, China.
Brent Lewin | Bloomberg | Getty Images
An advertisement for a Yum! Brands' KFC restaurant in Guangzhou, China.

Same store sales at China, where it generates more than half of its operating profit, rose just 2 percent. They were expected to be especially strong, at 9.6 percent, as the company attempts to recover from a supplier scandal last July, according to a Consensus Metrix estimate.

In a release, CEO Greg Creed said "[T]he pace of recovery in our China Division is below our expectations. Outside of China, our Taco Bell and KFC Divisions continued to sustain their positive sales momentum while Pizza Hut was relatively flat. Given our lower full-year expectations in China, combined with additional foreign exchange impact, we now expect 2015 EPS growth to be well below our target of at least 10%."

Systemwide same store sales at Yum Brands were forecast to rise 3.8 percent.

"China sales recovery is continuing—just a slower than expected pace. The reason is a combination of two factors— external factors and macro factors in the Chinese economy and foreign exchange headwinds along with internal factors, the way we executed some promotions," said Chief Public Affairs Officer, Jonathan Blum, in a phone interview.

During the quarter, adjusted earnings rose to $1 from 87 cents per share in the year-earlier period. Revenue rose to $3.42 billion from $3.35 billion a year ago.

Wall Street expected Yum Brands to deliver adjusted earnings of $1.07 per share on $3.68 billion in revenue, according to a consensus estimate from Thomson Reuters.

Looking ahead, Yum expects full-year China same-store sales to be "low single digit negative" and full-year EPS growth to be positive in the low single digits.