Markets & Finance

Merrill Downgrades Yum Brands to 'Neutral'


Merrill Lynch downgraded Yum Brands (YUM) and Wendy's (WEN) to neutral from buy.

Analyst Peter Oakes says Yum's downgrade was based on prospects for weaker domestic same store sales, and the stock's healthy valuation. With Kentucky Fried Chicken's recovery less certain, he says tougher comps at Taco Bell and Pizza Hut are under increasing pressure to make up the difference. Oakes says fourth quarter domestic comps are expected to be flat -- the softest in four quarters, adding that macro economic concerns are not helping.

Oakes upped his 2002 earnings per share est. by $0.01 to $1.90, and trimmed the 2003 by $0.03 to $2.05. He also downgraded Wenday's due to challenging comps, and heightened competitive pressures from Burger King's and McDonald's $1 menu efforts.


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