Strong Taco Bell sales fuel Yum Brands earnings beat

Yum Brands on Thursday reported quarterly earnings and revenue that beat Wall Street estimates, fueled by strong sales for KFC's international restaurants and Taco Bell.

Shares of the company rose more than 7% in morning trading.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:

The restaurant company reported fourth-quarter net income of $423 million, or $1.49 per share, down from $463 million, or $1.62 per share, a year earlier. Excluding refranchising gains and other items, Yum earned $1.61 per share.

Net sales climbed 16% to $2.36 billion. More than half of Yum's quarterly sales were digital, which includes online and delivery orders and those placed through in-store kiosks.

Yum's same-store sales rose 1% in the quarter, thanks to Taco Bell.

Taco Bell reported same-store sales growth of 5%. Executives have previously credited the chain's strong value perception for its success in recent quarters.

KFC's same-store sales were flat for the quarter, but the fried chicken chain saw stronger demand outside of the U.S. For example, in China, its largest market, KFC's system sales increased 5% in the quarter. Europe and Latin America reported double-digit system sales growth. The chain's international same-store sales rose 1% overall in the quarter.

Meanwhile, in its home market, KFC's U.S. same-store sales slid 5%. Popeyes has overtaken the chain to become the second-biggest chicken chain in the U.S., and other upstarts, like Raising Cane's, have been growing quickly. Yum has tapped Taco Bell's North American President Scott Mezvinsky as the new chief executive of KFC, starting in March.

Pizza Hut, the laggard of Yum's portfolio, reported same-store sales declines of 1% for the quarter. The pizza chain's U.S. same-store sales fell 2%, while its international business reported flat same-store sales.

"In the U.S., sales remained under pressure due to more value competition across both the QSR industry and the pizza category," Yum CEO David Gibbs said on the company's conference call. "We've seen that everyday value offerings such as the $7 Deal Lovers effectively drive repeat visits from existing consumers. However, to attract lighter, lapsed consumers, we must lean further into disruptive and distinctive value promotions."

Yum opened 1,804 new restaurants during the quarter, growing its unit count by 5%.

The company is also rolling out Byte, its proprietary artificial intelligence-driven software for Pizza Hut, Taco Bell and KFC. For example, the tech makes it easier for consumers to place digital orders and reduces complexity in the kitchen for employees, executives said.

"We're giving our franchisees a much more turnkey solution that gives us more capability in terms of how we can grow," Gibbs said.