Yum! Brands Earnings Beat Masks Taco Bell Weakness, but CEO Sees Recovery Taking Hold

Yum! Brands Inc (NYSE:YUM) stock is little changed on Tuesday after the restaurant operator reported mixed third-quarter results, with adjusted earnings exceeding Wall Street expectations while revenue narrowly missed estimates, as weakness at Taco Bell offset growth at KFC.

Yum! Brands reported third-quarter adjusted earnings of $1.56 per share, beating the analyst consensus estimate of $1.49.

Quarterly revenue rose 4% year over year to $2.05 billion, narrowly missing the consensus estimate of $2.06 billion.

The company completed the divestiture of the Pizza Hut brand in mainland China to Yum China Holdings Inc (NYSE:YUMC) for $1.2 billion and the remaining Pizza Hut business to LongRange Capital for approximately $1.5 billion.

Third-Quarter Highlights

Yum! Brands reported adjusted earnings of $1.56 per share, compared with $1.58 in the prior-year quarter, while GAAP earnings rose to $5.92 per share from $1.41 a year earlier, including a pre-tax gain of $1.7 billion related to the Pizza Hut divestiture.

Worldwide same-store sales remained flat year over year, excluding Pizza Hut.

Excluding the results of Pizza Hut from both 2026 and 2025, core operating profit grew 1% year over year.

Digital system sales exceeded $9 billion during the quarter, representing approximately 64% of system sales.

During the first nine months of 2026, the company returned $1.8 billion to shareholders through dividends and share repurchases.

The company ended the quarter with $2.1 billion in cash and cash equivalents.

KFC Expansion Supports Profit Growth

KFC’s same-store sales increased 1% year over year, while operating profit rose 9% to $425 million from $388 million.

KFC’s operating margin expanded 70 basis points to 44.8%, reflecting improved divisional profitability.

The brand opened 878 gross new restaurants across 66 countries during the quarter, bringing its global restaurant count to 35,421, representing 7% year-over-year unit growth.

System sales excluding foreign exchange grew 6% year over year to $10.05 billion.

The Middle East, Turkey and North Africa region led the system sales growth with more than a 25% increase, followed by India with 20% growth. However, U.S. sales declined 6%.

Taco Bell Sales Decline, But Management Signals Recovery

Taco Bell’s same-store sales declined 4%, compared with 7% growth in the prior-year quarter.

The U.S. business faced pressure as system sales declined 3% and same-store sales declined 4% due to an industry-wide food safety issue.

CEO Chris Turner highlighted signs of improving domestic demand, noting the brand has outperformed the broader U.S. quick-service restaurant industry in same-store sales growth since the end of September.

International Taco Bell same-store sales increased 5%, with system sales growing 14% excluding foreign exchange.

Taco Bell’s operating profit narrowed to $255 million from $267 million a year earlier.

Meanwhile, Habit Burger & Grill reported 3% system sales growth, with same-store sales remaining flat.

Long-Term Growth Outlook Maintained

Yum! Brands expects full-year 2026 unit growth, excluding Pizza Hut, to exceed its long-term 5% target.

Yum! Brands also reiterated its long-term financial targets, including average annual restaurant unit growth of 5%, system sales growth of 7% excluding foreign exchange, and core operating profit growth of at least 8%.

Turner emphasized the company’s sharpened focus on its Raise the B.A.R. strategic priorities following the Pizza Hut divestiture.

Management plans to build on Taco Bell’s recent recovery through differentiated value offerings and menu innovation aimed at attracting consumers across groups.

The company plans to invest in technology and AI to enhance consumer experiences and operational efficiencies, with initiatives like drive-thru Voice AI showing positive results.

YUM Stock Price Activity: Yum! Brands shares are trading higher by 0.20% at $157.91 at the time of publication on Tuesday, according to Benzinga Pro data.

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