Yum Brands Beats Q3 Estimates, Taco Bell Soft but CEO Sees Recovery

Yum Brands shares were little changed on Tuesday after the restaurant operator reported mixed third-quarter results: adjusted earnings beat Wall Street expectations, while revenue came in slightly below estimates, with weakness at Taco Bell offsetting growth at KFC.

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

Quarterly revenue rose 4% year-over-year to $2.05 billion, slightly below the consensus estimate of $2.06 billion.

The company completed the sale of its Pizza Hut brand in mainland China to Yum China Holdings for $1.2 billion, and sold its remaining Pizza Hut business to LongRange Capital for approximately $1.5 billion.

Third-Quarter Highlights

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

Excluding Pizza Hut, global same-store sales were flat year-over-year.

Excluding Pizza Hut results for 2026 and 2025, core operating profit grew 1% year-over-year.

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

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

The company held $2.1 billion in cash and cash equivalents at the end of the quarter.

KFC Expansion Supports Profit Growth

KFC same-store sales rose 1% year-over-year, with operating profit growing 9% to $425 million from $388 million.

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

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

System sales, excluding currency effects, grew 6% year-over-year to $10.05 billion.

The Middle East, Turkey, and North Africa led system sales growth with an increase of over 25%, followed by India at 20%. However, U.S. sales declined 6%.

Taco Bell Sales Decline, but Management Signals Recovery

Taco Bell same-store sales fell 4%, compared with growth of 7% in the prior-year period.

The U.S. business was under pressure, with system sales down 3% and same-store sales down 4%, due to industry-wide food safety issues.

CEO Chris Turner highlighted signs of improving domestic demand, noting that since late September, the brand's same-store sales growth performance has outpaced the broader U.S. quick-service restaurant industry.

Taco Bell international same-store sales grew 5%, with system sales up 14% excluding currency effects.

Taco Bell operating profit narrowed to $255 million from $267 million in the prior-year period.

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

Long-Term Growth Outlook Maintained

Yum Brands expects full-year 2026 unit growth to exceed its 5% long-term target.

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

Turner emphasized that following the Pizza Hut divestitures, the company will sharpen its focus on its "Raise the B.A.R." strategic priorities.

Management plans to sustain Taco Bell's recent recovery momentum through differentiated value offerings and menu innovation to attract a broad range of consumer segments.

The company plans to invest in technology and AI to enhance consumer experience and operational efficiency, with initiatives such as drive-thru voice AI already showing positive results.

YUM stock movement: Based on Tuesday data, as of the time of writing, Yum Brands shares were up 0.20% at $157.91.