Can Yum! Brands Outperform in both China and the U.S.?

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T = Technicals on the Stock Chart are Good, but not Great

As of December 26, shares of Yum! Brands were 4.27 percent below their 20-day simple moving average, or SMA; 7.24 percent below their 50-day SMA; and 3.99 percent below their 200-day SMA.

Since the beginning of 2012, the stock price has been in an upward trend, climbing 11.05 percent this year to date, and climbing 9.68 percent year over year.

Yum! Brands, Inc. Stock Chart

As a benchmark, the S&P 500 has climbed 11.98 percent this year to date and climbed 12.2 percent year over year, modestly beating Yum! Brands by 0.93 and 2.52 percentage points respectively.

For comparison, shares of McDonald’s Corp. (NYSE:MCD) have come down 10.22 percent, shares of Chipotle Mexican Grill, Inc. (NYSE:CMG) have come down 15.31 percent, and shares of Darden Restaurants, Inc. (NYSE:DRI) have come down 0.29 percent this year to date.

It’s worth pointing out that shares of Yum! Brands fell 9.92 percent on November 29 after the company announced full-year 2012 and 2013 EPS targets that were slightly off the mark.

Full-year 2012 EPS growth was forecast at 13 percent, or $3.24 per share, excluding special items. This was just two cents shy of the average analyst estimate of $3.26 per share, and four cents shy of I/B/E/S estimates.

Yum! Brands “expects to once again deliver at least 10% EPS growth in 2013, excluding Special Items, which would mark twelve consecutive years of meeting or exceeding this annual EPS growth target,” or earnings of about $3.58 per share. On average, analysts are estimating EPS of $3.68, or $3.74 according to I/B/E/S.

E = Earnings Growth is Very Strong

Not many companies can boast 12 consecutive years of double-digit EPS growth, minus special items. Keep in mind that the company’s boast was for EPS growth before special items, which knocked 15 cents off 2010 EPS.

 FY: Jan. – Dec. 2007 2008 2009 2010 2011
Revenue ($) in millions 10,416 11,279 10,836 11,343 12,626
Change - +8.29% -3.93% +4.68% +11.31%
Diluted EPS ($) 1.68 1.96 2.22 2.38 2.74
Change - +16.85% +12.94% +7.46% +15.09%

 

Revenues did drop slightly in 2009, a forgivable blemish given the financial crisis. For a quick comparison, McDonald’s revenues fell 3.31 percent in the same year, but Chipotle Mexican Grill still posted a 14 percent gain (although, this represented an 8.67 percentage-point drop from 2008)…

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