YUM Brands Earnings Preview: Second Quarter 2011

YUM Brands is scheduled to report their second quarter 2011 results after the market closes on Wednesday, July 13, 2011. Based on our analysis, we at EarningsPreviews.com are expecting YUM Brands to report inline quarterly results that meet Wall Street’s consensus expectations.

Earnings Analysis

Last quarter, YUM Brands disappointed investors by delivering first quarter earnings that fell below consensus expectations. YUM is considered a strong China play, but their performance has been weighed down by declining profits domestically. We expect to see a similar story for the second quarter with strong results in China and the emerging markets, but weak performance in the U.S. will make it difficult to deliver much of an earnings beat.

Analyst Expectations

We are forecasting revenues of $2.71 billion and EPS of $.61. This would represent revenue growth of 5 percent from last year’s $2.57 billion in the same period. The current analyst consensus estimates calls for revenues of $2.70 billion and EPS of $.61.

Stock Performance

Since the beginning of 2011, YUM’s stock price has gained 13 percent and has outperformed the 9 percent gain in the Dow Jones industrial average.  

Valuation

YUM Brands stock is trading at a valuation of 17x consensus 2012 EPS estimates. The stock appears to be fully valued and is currently trading near their 52-week high of $57 per share.

Recommendation: Hold with an $56 price target