Yum! Brands, Inc. (YUM) Ahead Of Earnings: China Holds The Key

Yum! Brands, Inc. (YUM) Ahead Of Earnings: China Holds The Key
By Yum! Brands, Inc. [Public domain], via Wikimedia Commons

Yum! Brands, Inc. (NYSE:YUM) shares declined as much as 1% today ahead of this evening’s earnings report. On average, analysts are expecting the fast food chain company to report earnings of 80 cents per share. They’re also expecting to see $4.3 billion in revenue, compared to $4.15 billion in the same quarter last year.

The company’s stock has been extremely volatile for the last 12 months or so, and the company itself returned just a little more than 1%. This year so far, shares have already fallen more than 11%, thanks mostly to volatility in the macro markets.

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How China figures into Yum’s results

Seeking Alpha contributor Quoth the Raven highlights how important of a role China has played in Yum! Brands, Inc. (NYSE:YUM)’s growth over the last few years. In particular, the company’s KFC chain has been trying to deal with setbacks caused by concerns over food safety. Some have also accused the fast food chain of using suppliers which use large amounts of antibiotics when raising their chickens. Nonetheless, KFC is planning a major expansion in China, aiming to open about 700 new restaurants there over the next year or so.

Approximately 40% of all of Yum! Brands, Inc. (NYSE:YUM)’s sales come from China, so if the company’s results in that part of the world aren’t as bad as many expect them to be, this could be a good thing for its stock.

This year could be better for Yum Brands

Some say 2014 will be a better year for Yum! Brands, Inc. (NYSE:YUM) because it did post some small gains in China through the end of last year. The results which will be reported today will provide some important insight on just how the company ended the year and what this year could hold for it.

In general, analysts seem rather split on Yum! Brands, Inc. (NYSE:YUM). Morgan Stanley analysts downgraded it in early January to Equal-Weight, although UBS AG analysts initiated coverage of the company with a Buy rating. Around the same time, Credit Suisse also initiated coverage of Yum Brands, placing a Neutral rating.

According Zolmax, 16 analysts have a Hold rating on the stock, while seven have a Buy rating and just one has a Strong Buy rating.

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