kfc yum brands chinaREUTERS/Wilson Chu
Yum Brands reported second-quarter earnings that topped forecasts and raised its expectation for full-year profits after the market close on Wednesday.
Yum Brands reported $0.75 in adjusted earnings per share ($0.74 estimated, according to Bloomberg), on revenues of $3.01 billion ($3.09 billion estimated).
It boosted its guidance for core operating profit growth guidance to at least 14%, from 12%.
The company's shares rose by as much as 4% in pre-market trading.
"Challenging industry conditions" outside the US softened overall sales at KFC, Taco Bell, and Pizza Hut — the restaurants it operates — according to the earnings statement.
Comparable-store sales — at locations open for at least one year — were flat in China, just as analysts had forecast.
Analysts were again focusing on how the restaurants performed in China, where sales slowed recently. As much as half of Yum Brands' sales were earned from China in the second quarter.
KFC China comparable-store sales rose 3%, matching the median estimate on Bloomberg.
"I'm particularly pleased with the continued sales momentum at KFC China, which delivered better-than-expected same-store sales growth," said CEO Greg Creed in the earnings statement. "Importantly, our China Division is off to a good start in the third quarter for both KFC and Pizza Hut Casual Dining, including a return to positive same-store sales at Pizza Hut Casual Dining in recent weeks."
Bloomberg Intelligence analysts noted that the second quarter is usually the toughest of the year in China, as some sales are lost to the first quarter because of the Chinese New Year.
The company last year announced it was splitting into two public entities: Yum China would become a franchise in mainland China, with exclusive rights to KFC, Pizza Hut and Taco Bell; and Yum Brands would expand the three franchises around the world.
The company expects the split to be completed by the end of October.
Yum Brands shares had rallied about 17% this year through the market close on Wednesday.

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