Yum! Brands Yummy Earnings

Yum! Brands Inc. (YUM-NYSE) has issued results:  $0.70 EPS and $2.223 Billion versus $0.64 & $2.16 Billion estimates.  During the first-quarter 2007, Yum! repurchased 3.9 million shares at an average purchase price of $59.04.

Yum is raising fiscal targets: EPS outlook to at least 11% growth or $3.23 based on the continued strong growth from our China and YRI divisions. The company’s prior EPS guidance for 2007 was at least 10% growth or $3.21 per share.  Wall Street currently has estimates of $3.23 EPS for 2007.

China offset weak Taco Bell sales in the US.  The company does admit that two adverse incidents at Taco Bell accounted for enough negative publicity to hurt Taco Bell sales (after being linked to e.coli and the NYC rat incident).  Total restaurants in the system were up 2% to 32,558 units.  Strength overseas is a powerful tool and the company plans to open 1,000 units this year.

Restructuring continues: the current three-year U.S. refranchising plan through 2008 is to sell approximately 1,500 company restaurants to franchisees, which will increase U.S. franchise ownership to approximately 83% of the system from 77% today. 

So far shares are up 2% to $64.50 in after-hours trades, which would be a new 52-week high.  The 52-week trading range is $44.21 to $63.68.  Here was what we noted on the rat case on February 23, 2007.

Jon C. Ogg
May 1, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.