Yum! Brands (
) is trading stronger Tuesday afternoon, heading into its
third-quarter earnings report.
After the market closes, Yum! should report earnings of 83 cents
per share on revenue of $3.10 billion. Earnings would be a 26
percent gain from last quarter, and 13.7 percent increase from 73
cents per share reported the same period last year.
Acting rather steadfast amid market turmoil, Yum! shares rose about
0.3 percent to $54.37 at the end of August. The stock is down 10
percent since the end of the period, and 1.1 percent better on the
Yum! is currently selling for 15 times fiscal 2012 earnings
expectations, just about in-line when compared with 14.3 times for
Domino's Pizza (
) and 14.9 times for McDonald's (
Data from Bloomberg has 13 analysts with a Buy rating, 8 at Hold,
and 1 with a Sell. The Street price target average is $59.50, with
a low of $54 and high of $65. Yum! has traded in a range of $46.09
to $57.75 over the last 52-week period.
- Deutsche Bank is modeling earnings of 82 cents per share and
revenue of $3.106 billion. Comps in the U.S. expected to drop 3
percent, gain 2.5 percent for International, (YRI) and 14 percent
of gain in China. Deutsche comments, "While the tenor of the
macro data from China has softened a bit of late, we do not see
much risk to 3Q results. YUM hosted an investor mtg. in Shanghai
in early Sept, and we did not sense any material change in tone.
(3Q ended on Aug 31 for YUM's China segment.) Plus, China macro
data such as retail sales and exports remained strong into Aug."
Notably, Deutsche found little correlation between Yum! sales and
certain China economic data. Highest correlation's occurred when
compared with "inflation measures, CPI "food" and PPI "food"
(+80% and +85% resp.)."
- Wells Fargo sees earnings of 81 cents per share, with
potential upside coming from China. On China, Wells sees comps
increasing 15 percent, with YRI up 4 percent, and a drop of 2
percent in the U.S. Wells comments, "YUM's latest guidance (July
2011) was for 9% food cost inflation in China for FY2011. In
addition, labor cost inflation is expected to be up in the mid to
high teens this year. However, we also note that higher wage
rates should benefit consumer spending. We also were somewhat
encouraged by the uptick in China consumer confidence in August
sequentially, when the index rose 0.1 point to 86.21, although we
note that the index remained 0.15 points lower on a year over
Notably, Wells also views Taco Bell's new
sandwiches as an "exceptional value."
- J.P. Morgan is looking for earnings of 81 cents per share in
the quarter. China comps expected to increase 13 percent and YRI
up 2 percent, JPMorgan is bullish on the prospects for expansion
in India, targeting KFC and Pizza Hut delivery as the two bigger
opportunities in the region.
Stay tuned to StreetInsider.com's
section to see our analysis of the highly-anticipated quarterly
results within seconds of their release. You can also check out
Yum!'s past performace at Streetinsider's
Yum! Income Statement