Yum! Brands, Inc. YUM is scheduled to report first-quarter 2017 numbers on May 3, before the opening bell.

Last quarter, Yum! Brands posted a 9.72% positive earnings surprise. In fact, the company outpaced/met earnings estimates in the trailing four-quarters with an average beat of 6.38%.

Let’s see how things are shaping up for this announcement.

Yum! Brands, Inc. Price and EPS Surprise

Yum! Brands, Inc. Price and EPS Surprise | Yum! Brands, Inc. Quote

Factors Likely to Affect Q1 Results

Following China business separation, Yum! Brands endeavors to drive growth by employing greater focus on the development of its three iconic global brands, increasing its franchise ownership, and creating a leaner, more efficient cost structure, should bolster first-quarter results.

Particularly, we expect Yum! Brands’ U.S. division comps to be solid in the quarter. While Taco Bell’s value-driven, innovation-focused model should continue driving comps, Pizza Hut comps are expected to benefit from improvements in the delivery times and point-of-sale system simplification. Meanwhile, KFC’s efforts to revamp its outlets, and focus on delivery and convenience are expected to continue boosting up comps.

We believe, increased investments in technology-driven initiatives along with augmented pace of unit development should further drive top-line growth in the to-be-reported quarter.

However, the slight uncertainty surrounding the company’s business post China division separation, slowdown in emerging markets along with negative currency translation may hamper the quarter’s performance. Further, a soft consumer spending environment in the U.S. restaurant space might restrict revenue growth.

Earnings Whispers

Our proven model does not conclusively show earnings beat for Yum! Brands this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Yum! Brands has an Earnings ESP of -3.28%. This is because the Most Accurate estimate is 59 cents, while the Zacks Consensus Estimate is pegged higher at 61 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Yum! Brands’ has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

Notably, we caution you against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Jack in the Box Inc. JACK has an Earnings ESP of +4.40% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wingstop Inc. WING has an Earnings ESP of +6.67% and a Zacks Rank #3.

The Priceline Group Inc. PCLN has an Earnings ESP of +2.06% and a Zacks Rank #3.

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