Yum! Beats Street, Raises Guidance Despite Weak U.S. Sales

Yum! Brands reported Q1 profits rose $194 million, or $0.70/share, up 14% from Q1 2006 profits of $170m ($0.59). The Taco Bell, KFC and Pizza Hut restaurant chain owners' revenue rose 7% to $2.22 billion from 2006's $2.09b. Wall Street expected $0.64/share on revenue of $2.15b. Shares rose 2% to $63.12 on Tuesday in response. Yum's 19% EPS growth was led by China, where profits rose 31%, and Yum's international division, up 25%. International growth offset lagging U.S. sales after two highly publicized incidents this year: An E. coli outbreak at several Northeastern Taco Bell restaurants, and a rat infestation at a NYC Taco Bell. U.S. sales dropped 12% -- same-store sales declined 3% at franchises, and 6% at company-owned stores. China same-store sales rose 9% in comparison. Yum raised 2007 guidance from $3.21 to $3.23/share, beating its 10% growth target six years running, and announced 1,000 new international restaurant openings in 2007 to its current 34,692 stores. The company's stock trades at a 17 P/E to 2008e earnings, vs. rivals McDonald's (16.6) and Burger King (18.9).

Sources: Press Release, Forbes, Reuters, MarketWatch, NY Times
Commentary: McDonald's Focuses on Expanded Menu and Convenience in China • Yum Brands: Globalization Driving Growth • Yum! Brands: Satisfy Your Cravings
Stocks/ETFs to watch: Yum! Brands, Inc. (YUM), McDonald's Corp. (MCD), Burger King Holdings, Inc. (BKC)
Conference call transcripts: Yum! Brands Q4 2006 Earnings Call Transcript Related: Taco Bell Rats in NYC- video • Yum Brands Removes Trans Fat From Its List of Ingredients

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