Yum China Gears Up for Q2 Earnings: Key Factors to Note

Yum China Holdings, Inc. YUMC is scheduled to report second-quarter 2025 results on Aug. 5, before the opening bell.

In the last reported quarter, the company’s adjusted earnings missed the Zacks Consensus Estimate by 1.3% and fell 8.5% year over year. Total revenues marginally missed the consensus mark by 4.2% but grew 0.7% from the year-ago quarter.

YUMC’s earnings surpassed the consensus mark in three of the trailing four quarters and missed on one occasion, the average surprise being 8.1%.

Trend in YUMC’s Estimate Revision

The Zacks Consensus Estimate for adjusted earnings per share (EPS) has been consistent at 57 cents over the past 30 days. The estimated figure indicates a 3.6% rise from the year-ago earnings of 55 cents per share.

The consensus mark for revenues is pegged at $2.78 billion, implying 3.9% year-over-year growth.

Factors Likely to Shape Yum China’s Q2 Results

The company’s top line in the second quarter of 2025 is likely to have benefited from a combination of steady same-store transaction growth and new unit expansion. This, alongside the company's diligent efforts, effective new strategies, and improved value-for-money proposition and mass market placement, is likely to have aided traffic growth. The business ideas include Pizza Hut WOW and the adjacent KCOFFEE Cafes, both of which have demonstrated significant promise since their debuts.

Our model expects total revenues from KFC and Pizza Hut to grow year over year by 4.8% to $2.11 billion and 0.4% to $542 million, respectively. 

Moreover, the bottom line of YUMC is expected to have improved on the back of disciplined cost management and margin expansion, despite some pressure from wage inflation and a higher delivery mix.

On to labor expenses, the huge expansion in delivery is still putting pressure on overall rider costs. Their goal for non-rider costs is to keep them stable by offsetting the wage inflation of frontline staff through more automation, simplification, and centralization.
We expect the adjusted operating profit margin to increase 30 basis points (bps) year over year to 10.2%, with adjusted operating profit increasing 7.1% to $284.9 million. Adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted EBITDA margin are also expected to grow year over year by 5.7% to $421.9 million and 20 bps to 15.1%, respectively.

What Our Model Unveils for Yum China

Our proven model does not conclusively predict an earnings beat for Yum China this time around. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as elaborated below.

Earnings ESP: YUMC has an Earnings ESP of 0.00%. You can uncover the best stocks before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank of 2.

Stocks With the Favorable Combination

Here are some companies in the Zacks restaurants sector that, according to our model, have the right combination of elements to post an earnings beat in the quarter to be reported.

Dutch Bros BROS currently has an Earnings ESP of +1.62 and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company’s earnings beat estimates in each of the trailing four quarters, the average surprise being 92.37%. BROS earnings for the second quarter of 2025 are expected to decrease 5.3% year over year.

Brinker International EAT currently has an Earnings ESP of +0.93 and a Zacks Rank of 3.

The company’s earnings beat estimates in three of the trailing four quarters, the average surprise being 24.52%.  Brinker International’s earnings for the second quarter of 2025 are expected to increase 51% year over year.

McDonald's MCD currently has an Earnings ESP of +0.43 and a Zacks Rank of 3.

The company’s earnings beat estimates in three of the trailing four quarters, the average surprise being negative 0.22%. McDonald's earnings for the second quarter of 2025 are expected to increase 6.1% year over year.

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This article originally published on Zacks Investment Research (zacks.com).

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