Yum China (YUMC) Stock Trades Down, Here Is Why

Jabin Bastian /
2024/04/30 11:36 am EDT

What Happened:

Shares of fast-food company Yum China (NYSE:YUMC) fell 7.5% in the morning session after the company reported first quarter results with same store sales missing expectations which led to revenue falling below expectations. Management added that the company is "operating under a near-term challenging environment." On the other hand, EPS narrowly outperformed Wall Street's estimates. Zooming out, we conclude that it was a mixed quarter, with disappointing topline performance driving the narrative and stock action.

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What is the market telling us:

Yum China's shares are not very volatile than the market average and over the last year have had only 6 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was 3 months ago, when the stock gained 18.8% on the news that the company reported fourth-quarter results with revenue outperforming Wall Street's estimates, driven by better-than-expected same-store sales and a higher number of locations. Profitability was solid, leading to an EPS beat. Looking ahead, the company reiterated that from 2024 to 2026, system sales and profit profit will grow at high-single-to-double-digit CAGRs, leading to a double-digit CAGR for EPS. Zooming out, this was a fantastic quarter that should have shareholders cheering.

Yum China is down 12.3% since the beginning of the year, and at $37.24 per share it is trading 40.5% below its 52-week high of $62.58 from May 2023. Investors who bought $1,000 worth of Yum China's shares 5 years ago would now be looking at an investment worth $783.21.

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