Yum China Holdings, Inc. UMC It is likely to benefit from its digital initiatives, unit expansion and menu innovation efforts. However, coronavirus-induced soft traffic and inflationary pressures are headwinds.
Let us discuss the factors that highlight why investors should hold the stock for some time.
Yum China is reaping the benefits of its technology. The company is increasingly moving towards digital and content marketing to expand its customer base. It has adopted a high-end delivery strategy that includes collaborating with aggregators to source traffic and fulfill orders by the company’s KFC riders. Digital orders will contribute 91% of KFC and Pizza Hut’s company sales during the third quarter of 2022. During the quarter, the company’s delivery of KFC and Pizza Hut contributed about 38% of the company’s sales, up about four percentage points from the prior year quarter’s level. Speaking of loyalty membership, Yum Brands has built a robust loyalty program with over 400 million members in total. Pizza Hut’s membership grew to 100 million members. In the third quarter, members’ sales accounted for approximately 60% of system sales.
The company focuses on digital R&D center to drive operational excellence by consolidating and expanding resources dedicated to developing solutions and services. This includes the use of technologies in Big Data, Artificial Intelligence, Middle Office and Digital SaaS to drive end-to-end digitalisation. During the third quarter of 2022, the company focused on maximizing delivery coverage and flexibility by using AI technology. For this, the company launched Smart Delivery to adjust the delivery coverage for each store. This initiative paved the way for better customer coverage and efficient service offerings. The company said it has set aside $1-1.5 billion for investments in the digital and technology sector over the next five years.
Yum China is focused on continued unit growth of restaurants to drive incremental sales. During the third quarter of 2022, Yum China opened 403 gross new restaurants, driven by growth in the KFC and Pizza Hut brands. As of June 30, the company’s total restaurant count stood at 12,409, an increase of 994 stores year-on-year. Yum China expects to open 1,000-1,200 new stores in 2022.
Yum China focuses on streamlining operations and simplifying its menu to drive growth. During the third quarter of 2022, the company reported positive customer feedback regarding its Italian products such as Caffa premium single-origin beans and Tigel. In terms of beverages, the company launched a Coconut Latte and an Osmanthus Latte. These new products have been well received by the customers. Going forward, the company remains optimistic about its broad food and beverage offerings and looks forward to initiatives to increase awareness of its emerging brands.
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The company’s shares have gained 19.9% in the last one year IndustryThere is a decline of 2.2%.
The coronavirus crisis has materially impacted the company’s operations during the third quarter of 2022. During the quarter, COVID-related health measures remained in effect across China, affecting travel and social activities. In October, about 1,400 stores were either temporarily closed or offered only takeaway and delivery services, compared to 900 stores in the previous month. Although most food services are open, traffic is still lower than pre-pandemic levels. The company intends to monitor the situation regularly to assess the effects of COVID. It is also mindful of consumer spending and inflationary pressures.
zacks rank and top picks
Yum China currently holds the Zacks Rank #3 (Hold). you can see Here’s a full list of today’s Zacks #1 Ranked (Strong Buy) stocks.
Some of the better ranked stocks in Zacks retail Wholesale Sectors are Wingstop Inc. wing, Technoglass Inc. tgls And Domino’s Pizza, Inc. dpz,
Wingstop currently has a Zacks Rank #2 (Buy). WING’s long-term earnings growth rate is 12%. Wing shares have declined 14.2% in the last one year.
Zacks’ consensus estimates for Wingstop’s 2023 sales and earnings per share (EPS) suggest growth of 18.4% and 16.3%, respectively, from the year-ago period’s reported levels.
Technoglass currently holds a Zacks Rank of 2. TGLS’s trailing four-quarter earnings growth is an astonishing 26.9%. The company’s shares have gained 34.8% in the last one year.
Zacks’ consensus estimates for TGLS’s 2023 sales and EPS suggest growth of 11.2% and 9%, respectively, from the year-ago period’s reported levels.
Domino’s currently has a Zacks Rank of 2. DPZ has a long term earnings growth rate of 12.6%. DPZ shares have declined by 31.9% in the last one year.
Zacks’ consensus estimates for Domino’s 2023 sales and EPS suggest growth of 3.8% and 17.2%, respectively, from the year-ago period’s reported levels.
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