Yum Brands’ Earnings Outpace Expectations

Yum Brands Inc. on Wednesday reported better-than-expected earnings in its fiscal second quarter and raised its profit outlook for the year based on sales growth at its Taco Bell and KFC chains and a lower tax rate.

Net income for the period ended June 11 rose to $187 million, or 62 cents a share, from $178 million, or 58 cents, a year ago. Revenue rose 3.7% to $2.15 billion.

Wall Street analysts on average had expected the company to report a profit of 56 cents a share, according to Reuters Estimates.

The results were boosted by a $17-million gain for the initial public offering of Yum’s Polish-Czech joint venture and a lower tax rate that added 3 cents a share to the bottom line, Yum said.

Shares of the No. 2 fast-food company fell 55 cents to close at $51.71 before the release of earnings.

Yum raised its full-year earnings forecast by 2 cents to $2.62 a share, before special items. Analysts on average had been projecting earnings of $2.62 a share for the year, according to Reuters Estimates.

Sales at Yum’s U.S. restaurants open at least a year, a key retail measure known as same-store sales, rose 3% during the quarter. Performance in that business was boosted by a recent turnaround at KFC, where sales have benefited from new menu items and revamped advertising.

Same-store sales at Irvine-based Taco Bell were also strong during the quarter, and Pizza Hut’s same-store sales rose.

At Yum’s fast-growing China business, operating profit dropped 30% from last year. Yum pulled some products from its KFC restaurants in China this year because they contained a dye banned from use in food because of concerns it could lead to an increased risk of cancer.

Yum said the issue had been resolved, but negative publicity led some customers to stay away from the chain.

The company expects to recover about $13 million from its Chinese seasoning supplier, which would be recognized in the third quarter.