Yum China impresses with strong Q3 and generous return commitments

The shares of Yum China, which primarily consists of the restaurant brands Pizza Hut and KFC, are experiencing an upswing after the company presented its financial results for the third quarter of 2024. The stock, which had recently fallen by about 15 percent from its 52-week high, delighted investors with a 9 percent increase on Monday morning. In the third quarter, Yum China opened over 400 net new locations, bringing the total number of restaurants to nearly 16,000. Despite a 3 percent decline in sales at existing locations, the company was able to increase quarterly revenue by 5 percent year-over-year through the new locations. This revenue increase led to an impressive 15 percent growth in operating profit, which now stands at $371 million. With rising profits, Yum China's management is committed to generous returns to its shareholders. The company plans buybacks and dividends totaling $1.5 billion this year. Originally earmarked $3 billion for the period from 2024 to 2026, this target was raised to $4.5 billion. This strategy is remarkable, especially given the current market capitalization of approximately $18 billion, and contributes to today’s stock price increase. Economic challenges in China are affecting Yum China's same-store sales – a phenomenon hitting many companies in the region. Nonetheless, investors can take comfort from the increased profits. There is certainly room for further improvement, but the current price growth seems justified given the shareholder-friendly measures. Worth considering: While Yum China impresses, it was not named as one of the top stock picks by the Motley Fool Stock Advisor Team. There, other stocks are mentioned that could potentially offer enormous returns in the coming years.