Taco Bell cyclospora outbreak clouds Yum Brands earnings
Yum Brands faces earnings questions as a Taco Bell-linked cyclosporiasis outbreak hits traffic and pressures the stock.
By Sal Moretti · Money Reporter
4 min read
The Taco Bell cyclospora outbreak is set to dominate Yum Brands’ second-quarter earnings discussion, even though the quarter ended before federal regulators linked the illness cluster to lettuce served at some Taco Bell restaurants.
Yum Brands, the parent company of Taco Bell, KFC and Habit Burger & Grill, is expected to report results before the market opens Thursday. CNBC reported that investors are now focused less on the already-finished quarter and more on how the outbreak could hurt Taco Bell’s current sales.
Daily visits to Taco Bell restaurants have dropped by double digits since the Food and Drug Administration first connected the parasitic outbreak to lettuce served by the chain, according to Placer.ai data cited by CNBC. Yum shares have fallen 5% over that period, bringing the company’s market value to about $42 billion.
What is the Taco Bell cyclospora outbreak?
The Centers for Disease Control and Prevention says at least 1,947 people have been sickened in the cyclosporiasis outbreak, with 98 hospitalizations and no deaths reported as of Friday. Cyclosporiasis is a gastrointestinal illness tied to a parasite.
Federal health agencies have identified iceberg lettuce supplied by Taylor Farms as the likely source, according to CNBC. Taco Bell had removed the affected iceberg lettuce from its restaurants by July 17.
The timing is rough for Yum because Taco Bell is one of the company’s two main growth engines, alongside KFC’s international business. CNBC reported that Taco Bell has been the standout in Yum’s portfolio, with a devoted customer base and strong same-store sales growth even as diners watch their budgets.
Yum’s other pieces are not carrying the same weight. KFC’s overseas business is growing, but its U.S. sales have weakened enough that Yum no longer breaks them out, according to CNBC. Habit Burger & Grill has fewer than 400 locations and is a smaller part of the company. Yum also recently sold Pizza Hut to private equity firm LongRange Capital for $2.7 billion after years of struggles at the pizza chain.
What are analysts expecting from Yum Brands earnings?
Wall Street expects Yum to report earnings of $1.58 per share on $2.2 billion in revenue for the second quarter, according to LSEG estimates cited by CNBC. Taco Bell is expected to post 7% same-store sales growth for the period.
RBC Capital Markets analyst Logan Reich wrote in a July 21 client note that the outbreak likely had little effect on Taco Bell’s second quarter, but that the debate around the third quarter and beyond has been driving the stock. Reich said RBC lowered its Taco Bell estimates for the third and fourth quarters, while noting the stock’s recent selloff could create an opportunity if consumer confidence is not materially hurt beyond the outbreak.
Seven industry analysts cut their full-year earnings-per-share forecasts for Yum between June 30 and Tuesday, according to FactSet consensus data cited by CNBC.
Taco Bell is already trying to pull diners back. Chief Executive Sean Tresvant posted an open letter to customers five days after the lettuce was removed, writing, “We aren’t entitled to your loyalty. We earn it one meal at a time.” He also pledged that Taco Bell would put safety first and act transparently.
The chain has paired that message with discount deals. CNBC reported that Taco Bell sold Enchiritos and nacho fries for $1 on the day Tresvant posted his letter, and later sold its Mexican Pizza for $1.
The outbreak has not been declared over by the CDC. Michigan, described by CNBC as appearing to be the early epicenter, has continued to report rising daily cases. Health and Human Services Secretary Robert F. Kennedy Jr. told reporters the outbreak was “under control,” but federal health officials have not closed the case.
Analysts cited by CNBC generally expect Taco Bell to avoid the long sales damage Chipotle suffered after multiple foodborne illness outbreaks from 2015 to 2018, provided there are no further safety problems soon. A more recent comparison is McDonald’s, which saw U.S. traffic fall after a deadly E. coli outbreak tied to Quarter Pounders in late 2024, then saw domestic sales rebound by the second quarter, according to M Science research cited by CNBC.
This story draws on original reporting from CNBC.