Thursday, July 11, 2013

Yum Brands

Yum! Brands Inc. (YUM) reported 2Q13 earnings on Wednesday, July 10th after market hours. The company revealed that it earned $0.56 per share (excluding special items) in the period on revenue of $2.53 billion. Analysts were expecting earnings of $0.54 per share on revenue of $2.9 billion. Food safety concerns in China over Avian flu caused revenues for the quarter to fall 8%, from $3.17 billion last year to $2.9 billion in 2Q13.

China sales made up about 17% of total operating profits and nearly half of revenues in the second quarter. Same-store sales in the region fell 20% compared with the same period last year. Yum Brands has, however, addressed its Chinese customer base and vowed to improve its supplier standards. China sales trends have improved as expected and the company stays on track to open 700 new stores by the end of the year.

With concern over food quality subsiding in China and the continued international growth and expansion into emerging markets, we reiterate our BUY rating for Yum! Brands Inc.

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