Yum Brands on Wednesday reported second-quarter earnings that beat analyst expectations, but its quarterly revenue came up shy.
The company reported adjusted earnings of 75 cents per share on $3.01 billion in revenue.
related investing news
Analysts expected the company to report earnings of about 74 cents a share on $3.09 billion in revenue, according to a consensus estimate from Thomson Reuters.
Shares in the company rose about 4.5 percent in after-hours trading.
Yum reported flat same-store sales growth system-wide, with KFC up 2 percent for the quarter. Analysts expected KFC to report same-store sales growth of 2.3 percent, according to StreetAccount.
The company's China division had flat same-store sales, nearly on par with analyst forecasts.
"Given our strong first-half results and current trends in China, I'm pleased to raise our full-year core operating profit growth forecast to at least 14 percent from 12 percent previously," Greg Creed, CEO of Yum Brands, said in a statement.
China is a substantial part of its business, even as it plans to spin it off, as it is the largest division in terms of revenue, garnering $1.59 billion in the second quarter. Yum reaps more operating profit from China than any other division.
China KFC restaurants, the majority of the 7,246 stores in the division, had a 3 percent rise in same-store sales in the second quarter, while the smaller and more upscale Pizza Hut Casual Dining chain posted a drop of 11 percent. Analysts had expected a 3 percent gain at KFC China and a 7.8 percent drop at Pizza Hut China.
Still, Creed acknowledged "challenging industry conditions in the U.S.," which contributed to soft sales results for the company.
Yum shares are up about 17 percent year to date, but Wall Street was on average expecting a small decline in year-over-year revenue.
Mark Kalinowski, an analyst from Nomura, recently lowered his same-store sales growth forecast for Pizza Hut U.S. from 4 percent to 0 percent, citing menu fatigue surrounding the chain's "$5 Flavor Menu." He wasn't optimistic about Yum's other U.S segments either.
"(W)e do not believe either Taco Bell U.S. or KFC U.S. enjoyed standout quarters, as the non-burger quick-service business in the U.S. remained sluggish in [the second quarter]," Kalinowski, who projected the company would report earnings of 75 cents, wrote in a research note.
Still, Kalinowski maintained his projection that Yum's China division would see same-store sales grow by 3 percent.
"All in all, we continue to argue that the structure of Yum Brands — three large brands with little-to-no synergies (and arguably, dis-synergies) crammed together nearly 20 years ago by a beverage company — is not ideal," Kalinowski said.
— Reuters contributed to this report.