Earnings Preview: Yum! Brands
Yum! Brands (YUM) is expected to report Q3 earnings after market close Tuesday, October 7, with a conference call scheduled for Wednesday at 9:15 a.m. ET.
Guidance
Analysts are looking for a profit of 54c on revenue of $2.78B. The consensus range is 52c to 58c for EPS, and revenue of $2.67B to $2.85B, according to First Call. In July, Yum! forecast FY08 EPS $1.89 to $1.95 vs. First Call consensus of $1.90 and said it will "meet or exceed" FY08 profit targets despite commodity inflation.
Analyst Views
In a note to investors, Buckingham Research analyst Mitchell Speiser said that profit in China most likely slowed during the quarter, although it is expected to rise more than 30% in the region. JP Morgan analyst John Ivankoe lowered his Q3 EPS projection for Yum! to 52c from 55c largely because of slower sales trends in China, a huge growth engine for the company. Additionally, Ivankhoe believes same-store sales will increase about 4% compared with the Q2 rise of 14%.
Additionally, August's China Olympics are seen as a "net negative" that "disrupted consumer behavior" for Yum!, which has also been hit by high commodity costs. Analysts and investors are expected to listen for comments on whether the slowdown in consumer spending which is hurting Yum!'s sales and traffic, or if it is helping in this era of the price-conscious consumer searching for the best deal. The parent company of Taco Bell, Pizza Hut and KFC is expected to add product calorie information to its restaurants nationwide by January 1, 2011.
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