AP News

Ahead of the Bell: Yum Brands


NEW YORK (AP) — Shares of Yum Brands Inc. rose ahead of Wednesday's opening bell, after the fast food company reported a 23 percent jump in net income, boosted by higher demand in the U.S. and a quick turnaround in its fast-growing China division.

The Louisville, Ky., company, which owns the Taco Bell, Pizza Hut and KFC chains, also raised its earnings guidance for the year.

Yum shares rose $2.51, or 3.8 percent, to $68.55 in premarket trading.

Yum said its operating profit in China rose 22 percent, when adjusted for currency fluctuations. The company also raised its record pace of new restaurants in China, opening 192 locations. It now expects to open at least 750 stores this year, up from its prior forecast of at least 700 new restaurants.

In the U.S., Yum Brands said its third-quarter operating profit rose 13 percent. A new, upscale menu at Taco Bell created by celebrity chef Lorena Garcia helped lift sales in restaurants open at least a year by 7 percent for the Mexican chain.

That metric is a key measure of a retailer's health, because it excludes sales at stores that recently opened or closed. It rose 6 percent at Pizza Hut and 4 percent at KFC.

Janney analyst Mark Kalinowski backed his "Buy" rating for Yum, citing its overseas growth potential. He noted that international sales currently account for about 65 percent of the company's operating profits and he said he expects that to increase in the coming years.

The analyst also boosted his earnings predictions for the years 2012 through 2014 years by 5 cents each, predicting earnings per share of $3.28, $3.67 and $4.25, respectively. Analysts, on average, expect per-share profits of $3.27, $3.73 and $4.34, according to FactSet.

Overall for the third quarter, Yum reported an adjusted profit of 99 cents per share for the quarter. Revenue rose 9 percent to $3.57 billion from $3.27 billion. Analysts polled by FactSet expected earnings of 97 cents per share on revenue of $3.66 billion.

The company said it now expects to earn at least $3.24 per share for the year, excluding special items, up from its prior forecast of at least $3.22 per share. Analysts expect $3.27 per share.


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