A month has gone by since the last earnings report for Yum China Holdings (YUMC). Shares have lost about 5.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Yum China due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Yum China Q4 Earnings & Revenues Top Estimates, Both Up YoY
Yum China reported impressive fourth-quarter 2025 results, with earnings and revenues surpassing the Zacks Consensus Estimate. On a year-over-year basis, both the top and bottom lines increased.
Fourth-quarter results were supported by solid performance at both KFC and Pizza Hut, with continued momentum in system sales and same-store sales growth. The company’s dual focus on innovation and operational efficiency is supporting healthy margins. Its multi-brand portfolio, diverse formats and broad menu offerings enable Yum China to reach more customer segments and serve a wide range of dining occasions.
Looking ahead, management emphasized its continued focus on efficiency and sales leverage and expects to keep restaurant-level and operating margins in the first quarter of 2026 roughly in line with the prior-year period.
YUMC’s Q4 Earnings & Revenue Discussion
Yum China reported adjusted earnings per share of 40 cents, topping the Zacks Consensus Estimate of 35 cents by 14.3%. The bottom line increased 33% year over year.
Total revenues of $2.8 billion beat the consensus mark of $2.7 billion and grew 8.8% from the year-ago quarter. Excluding foreign currency translation, revenues were also up 7%.
System sales (excluding F/X) rose 7% year over year. KFC system sales rose 8%, while Pizza Hut grew 6%. Same-store transactions advanced 13%, marking the 12th consecutive quarter of growth.
Operating Highlights of YUMC
Total costs and expenses came in at $2.64 billion, up 8% from last year. The restaurant margin improved 70 basis points year over year to 13%, aided by savings in food, paper and occupancy costs.
Adjusted operating profit grew 25% to $187 million, compared with $151 million in the year-ago quarter. Adjusted EBITDA was $318 million, up from $292 million last year. The adjusted operating margin expanded 80 basis points year over year to 6.6%.
KFC’s revenues rose 9% to $2.1 billion, with operating profit up 16% to $223 million. Pizza Hut’s revenues climbed 6% to $540 million, and operating profit surged 52% to $20 million.
YUMC’s 2025 Highlights
Total revenues for 2025 came in at $11.8 billion compared with $11.3 billion reported in 2024.
Adjusted EBITDA in 2025 came in at $1.78 billion compared with $1.69 billion reported in 2024.
In 2025, adjusted EPS came in at $2.51 compared with $2.33 reported in the previous year.
The company opened 1,706 net new stores, with franchisees accounting for 31% of the openings. Total store count reached 18,101 as of Dec. 31, 2025.
YUMC’s Balance Sheet & Shareholder Returns
As of Dec. 31, 2025, Yum China had cash and cash equivalents of $506 million, down from $723 million at the end of 2024. Total liquidity (cash and short-term investments) stood at $2.19 billion. Long-term bank deposits and notes were $678 million.
The company returned $1.5 billion to its shareholders in 2025, comprising $1.14 billion in share repurchases and $353 million in cash dividends. The board declared a 21% increase in the cash dividend, raising it to $0.29 per share on Yum China’s common stock. The dividend will be payable on March 25, 2026, to its shareholders of record at the close of business on March 4.
2026 Outlook by YUMC
For 2026, Yum China expects to open a total of 20,000 stores, or more than 1,900 net new stores. Capital expenditure is anticipated to be between $600 million and $700 million. The company plans to return $1.5 billion to its shareholders in 2026.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Yum China has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock has a grade of B on the value side, putting it in the top 40% for value investors.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, Yum China has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Yum China (YUMC): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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