As this owns KFC, Pizza Hut, Taco Bell, and more, this one is sort of a defensive stock among restaurant stocks.  It has also been doing so well overseas, particularly growing in China, that the company has been able to weather the U.S. storms.  We even named this as one of our own "go-to defensive stocks for 2008" with a value eye when investors want to look for safer investing in an unsafe investing climate.  When we printed that list we liked this one even more than the value and growth of McDonalds (NYSE: MCD), and we think it actually has a better growth story as well.  This is also one of the key window dressing stocks used when fund managers need to show their positions.

Analysts have an average price target of almost $41.00, although we did just see a downgrade from "buy to hold" out of Deutsche Bank this week due to valuation premium to the market.  If Friday’s closing prices are any indicator and if the earnings were coming out immediately, it appears that options traders would be pricing in a move of up to $1.30 to $1.40 in either direction.

Yum! Brands’ 52-week trading range is $27.50 to $40.60.

Jon C. Ogg
February 2, 2008

First Call has estimates at $0.45 EPS and $2.44 Billion in revenues.  For Q4 2007 estimates are $0.45 EPS and $3.1 Billion in revenues.  It’s probably too hard to get a solid estimate for 2008 out of the company, but if it does give estimates for 2008 they are $1.83 EPS (about 11.5% EPS growth).  Of course the wild card here could come from the falling dollar as it is becoming a larger and larger international food growth story, which would likely work further in in its favor. 

Very recently, Jim Cramer interviewed the CEO and said this was a buy on any pullback.  We also noted YUM! earlier in the year as a ‘second line defensive stock’ for a crummy market, but it didn’t make the most recent list of defensive stocks over relative valuation and excessive stock performance.

The street probably has high quite expectations on the company as it has easily exceeded earnings estimates in each of the last four quarters.  The chart here has been stellar as shares are hitting new highs immediately ahead of earnings.  Unfortunately, the average analyst target is just over $36.00, so analysts are going to have to raise targets or make the "downgrade on valuations" call.  Based upon the last look, it appears that options traders are braced for this to move up to $1.10 to $1.20 in either direction based upon today’s earnings reaction.

Unfortunately, it appears the earnings conference call is not until tomorrow morning.  Its 2007 conference for analysts and investors is not scheduled until December 12, 2007.

Jon C. Ogg
October 8, 2007

David Novak, Chairman & CEO, came on for a quick interview.  He was bullish of course, but not unrealistically.  He said the company does have to deal with food inflation.  The major factor for the company is its international growth as it is opening a store per day in China.

Here are some more tid-bits investors should consider:

• We said the franchisee rat infestation would pass as a great buying opportunity.  It was.
• We have noted this as a second-line defensive stock, and it really is; maybe it is a growth stock AND a defensive stock.
• They have NO NEED to buy Wendy’s (NYSE:WEN) and they won’t.

YUM! closed down 0.6% today at $34.03, but its adjusted year high after a split is $35.05 and the low is $25.85.  Its market cap is now just under $18 Billion.

Jon C. Ogg
September 20, 2007