Yum China Holdings (NYSE:YUMC) has outperformed analysts' expectations for the fourth quarter, sending its shares soaring 13% in premarket trading.
The company posted earnings per share (EPS) of $0.25, exceeding the anticipated $0.16. The company's revenue for the quarter stood at $2.5 billion, also ahead of the consensus forecast of $2.36 billion.
KFC generated $1.87 billion in revenue, marking an 18% increase year-over-year and surpassing the estimated $1.79 billion. Pizza Hut also saw significant growth, with revenues reaching $496 million, up 23% from the previous year and above the forecast of $470.1 million.
The company improved its restaurant margin to 10.7% from 10.4% a year ago, beating the expected 9.6%.
During the fourth quarter, Yum China opened 542 new stores, bringing its total to 14,644 by the end of December 2023.
Looking ahead to 2024, Yum China intends to boost shareholder value through two key initiatives.
Firstly, the board has approved a 23% increase in the quarterly cash dividend to $0.16 per share, to be paid on March 26, 2024, to shareholders of record as of March 5, 2024.
Moreover, it plans to buy back $1.25 billion of its common stock through open market transactions in the U.S. and Hong Kong.
“We apply a target multiple of 13x to our 2024 EBITDA estimate, below the average multiple of 17x for Global Master Franchisee peers,” Morgan Stanley analysts said in a note.
“This reflects a balance of an asset-intensive model vs. our long-term estimates of 2-3%+ same-store sales growth, ~16% restaurant-level margins, and up to 3x unit expansion potential.”