Yum China beats estimates as profit jumps 25%
Fast-food operator raises dividend 21% and expands buyback program after strong fourth-quarter performance
Yum China Holdings delivered stronger-than-expected fourth-quarter results, with operating profit surging 25% year-over-year as the fast-food operator demonstrated resilience in a challenging Chinese consumer market.
The company reported adjusted earnings per share of $0.40 for the quarter ended December 31, surpassing analyst estimates of $0.37, while revenue of $2.82 billion topped consensus forecasts of $2.72 billion, according to StreetInsider. The shares rose 1.5% in pre-market trading following the announcement.
The earnings beat came despite a promotional environment, with Bloomberg noting that Yum China's profit improved despite discounts on delivery platforms. Delivery sales grew 34% year-over-year and now account for 53% of total company sales, up from 42% in the same quarter last year, reflecting the company's successful digital transformation strategy.
Chief Executive Officer Joey Wat said the quarter "capped off 2025 on a high note," highlighting three consecutive quarters of same-store sales growth and twelve straight quarters of transaction growth. "System sales growth sequentially improved to 7%, and operating profit increased 25% year-over-year in the fourth quarter," Wat said in the earnings announcement.
The Shanghai-based operator, which runs KFC, Pizza Hut and Taco Bell in China, opened a record 587 net new stores during the quarter, with 36% opened by franchisees. For the full year 2025, the company added 1,706 net new stores, bringing its total footprint to 18,101 locations across China.
Yum China's board rewarded shareholders with a 21% increase in the quarterly dividend to $0.29 per share, payable March 25. The company also unveiled an expanded capital return program, entering into share repurchase agreements totaling approximately $460 million for the first half of 2026, according to Benzinga.
The board expanded the company's share repurchase authorization by an additional $1 billion, bringing total authorization to approximately $5.4 billion. Since 2017 through December 11, 2025, Yum China has repurchased nearly 97.7 million shares worth about $4.2 billion.
"We remain committed to executing our RGM 3.0 strategy, focusing on innovation and operational efficiency, and broadening our addressable market through front-end segmentation and back-end consolidation," the company stated in its earnings presentation.
Looking ahead, Yum China targets opening more than 1,900 net new stores in 2026, bringing its total count above 20,000 locations. The company aims to reach more than 30,000 stores by 2030 using an equity-and-franchise hybrid model, with capital expenditures projected between $600 million and $700 million for 2026.
The company plans to return $1.5 billion to shareholders in 2026 through dividends and buybacks, roughly 9% of its market value as of December 11. Starting in 2027, Yum China intends to return approximately 100% of annual free cash flow to shareholders after subsidiaries' dividend payments to non-controlling interests, averaging between $900 million and over $1 billion annually, with returns expected to exceed $1 billion by 2028.
For the full year 2025, Yum China reported total revenues of $11.8 billion, up 4% year-over-year, with diluted EPS of $2.51 increasing 8% compared to the prior year. Operating profit for the year reached $1.3 billion, an 11% increase.
Analysts maintain a "Strong Buy" consensus rating on Yum China shares, with an average 12-month price target of $58.29, according to analyst data compiled by Seeking Alpha. The stock currently trades at approximately $50.74, with a market capitalization of $17.9 billion.
The strong performance comes amid broader signs of stabilization in China's consumer sector. Goldman Sachs forecasts China's real GDP growth at 4.8% for 2026, according to its recent economic outlook, suggesting a more favorable environment for consumer discretionary companies in the year ahead.