Can Yum! Brands Continue Its Earnings Surge? (YUM, MCD)

On Monday, we’ll get to see earnings out of Yum! Brands Inc. (NYSE:YUM).  The estimates from First Call for the fast food franchise giant are $0.42 EPS on $3.14 billion in revenues.  Estimates for next quarter are $0.42 EPS and its fiscal 2008 estimates are $1.87 EPS on $10.65 billion in revenues.

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