Yum Brands, the parent of restaurant chains Taco Bell, KFC, and Pizza Hut, was off to a rocky start in trading Tuesday as the company reported surprise weakness in China, where its business is expected to shrink this year.
"This skews to the worst case for the company," said David Palmer, managing director and senior food & restaurant analyst at UBS, who covers the company. China represents almost half of the business, in profit terms, for the company, he said in an interview on CNBC's "Squawk on the Street."
UBS cut its per share price target for Yum on Tuesday from $69 to $63, with a "base case" estimate of -8 percent decline for same store sales in China with a -20 percent decline in profit in the country. The "worst case" from UBS shows a -25 percent profit decline with an implied stock price of $50.