Ahead of the Bell: Yum speaks to investors, analysts
NEW YORK—International growth opportunities and high ingredient costs may be on Yum Brands Inc.'s agenda during its analyst meeting on Monday.
Several weeks ago, Louisville, Ky.-based Yum posted a 31 percent higher first-quarter profit and raised its full-year profit outlook.
While Yum faced sharply higher prices for ingredients like cheese, wheat and chicken, worldwide same-store sales rose 4 percent, including increases of 12 percent in mainland China.
Deutsche Bank analyst Jason West, in a recent client note, expects rising food and labor costs to weigh on restaurant margins over the remainder of 2008. In addition, consumers have been scaling back on their spending, which includes dining out, as high gas prices and tightening credit have made it more difficult to spend money.
Still, West said Yum often beats Wall Street expectations, despite a weak economy.
"While we have some concerns with earnings quality at Yum ... we must keep in mind that the company rarely misses estimates and international growth remains robust," West wrote in a client note.
West has a "Hold" rating on the stock based on valuation. Shares have risen 6.6 percent so far this year.
Two analysts rate shares "Buy" or the equivalent, while 11 analysts rate shares "Neutral," according to Thomson Financial.
